Exhibit 99.1

Independent Auditors’ Report

The Members
THQ Appalachia I, LLC:

Opinion

We have audited the consolidated financial statements of THQ Appalachia I, LLC and its subsidiaries (the Company), which comprise the consolidated balance sheet as of December 31, 2021, and the related consolidated statements of income, changes in members’ equity, and cash flows for the year then ended, and the related notes to the consolidated financial statements.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021, and the results of its operations and its cash flows for the year then ended in accordance with U.S. generally accepted accounting principles.

Basis for Opinion

We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Emphasis of Matter

Accounting principles generally accepted in the United States of America require that the supplemental information relating to oil and natural gas producing activities be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the United States Financial Accounting Standards Board who as described in Accounting Standards Codification Topic 932-235-50 considers the supplemental information to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with managements responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Responsibilities of Management for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with U.S. generally accepted accounting principles, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year after the date that the consolidated financial statements are available to be issued.

Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the consolidated financial statements.

In performing an audit in accordance with GAAS, we:

●

Exercise professional judgment and maintain professional skepticism throughout the audit.

●

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

●

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, no such opinion is expressed.

●

Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the consolidated financial statements.

●

Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit.

/s/ KPMG LLP

Dallas, Texas
September 16, 2022

THQ APPALACHIA I, LLC AND SUBSIDIARIES

Consolidated Balance Sheet

December 31, 2021

Assets
Current assets:
Cash and cash equivalents	$	20,253,529
Accounts receivable – oil and gas sales		211,213,561
Accounts receivable		1,686,081
Affiliate receivable		3,919,596
Fair market value of derivatives		18,655,632
Prepaid expenses		660,523
Gas imbalances		2,717,387
Total current assets		259,106,309
Property and equipment:
Oil and natural gas properties, at cost, using the successful efforts method, net		1,545,025,438
Gathering facilities, net		14,163,514
Other property and equipment, net		352,603
Total property and equipment, net		1,559,541,555
Other noncurrent assets:
Restricted cash		13,751,009
Long-term deposits		87,558
Fair market value of derivatives		30,957,358
Total other noncurrent assets		44,795,925
Total assets	$	1,863,443,789
Liabilities and Members’ Equity
Current liabilities:
Accounts payable and accrued expenses	$	84,912,966
Affiliate payables		133,412,101
Litigation reserve		400,000
Revenues payable		1,174,466
Fair market value of derivatives		250,177,807
Total current liabilities		470,077,340
Revolving credit facility		547,658,181
Fair market value of derivatives		66,297,141
Asset retirement obligations		6,940,400
Total liabilities		1,090,973,062
Commitments and contingencies (notes 7 and 8)
Members’ equity:
Members’ equity		592,925,823
Retained earnings		179,544,904
Total members’ equity		772,470,727
Total liabilities and members’ equity	$	1,863,443,789

See accompanying notes to consolidated financial statements.

THQ APPALACHIA I, LLC AND SUBSIDIARIES

Consolidated Statement of Income

Year Ended December 31, 2021

Revenues:
Oil sales	$	120,545,949
Natural gas sales		567,509,235
Natural gas liquids sales		277,814,828
Net loss on derivative instruments		(489,443,915	)
Other revenue (note 9)		4,570,883
Total revenues		480,996,980
Operating expenses:
Lease operating expenses		20,341,051
Production taxes		48,988,200
Gathering, processing and transportation		170,708,648
Exploration expense		9,115,394
Depreciation, depletion and amortization		166,225,087
General and administrative		19,184,804
Loss on sale of other property and equipment		4,256,119
Total operating expenses		438,819,303
Income from operations		42,177,677
Other income (expenses):
Interest expense		(23,863,454	)
Interest income		29,579
Total other income (expenses), net		(23,833,875	)
Net income	$	18,343,802

See accompanying notes to consolidated financial statements.

THQ APPALACHIA I, LLC AND SUBSIDIARIES

Consolidated Statement of Changes in Members’ Equity

Year Ended December 31, 2021

					Total
	Members’		Retained		members’
	equity		earnings		equity
Balance, December 31, 2020	$	591,925,651		161,201,102		753,126,753
Contributions of capital (note 10)		1,000,172		—		1,000,172
Net income		—		18,343,802		18,343,802
Balance, December 31, 2021	$	592,925,823		179,544,904		772,470,727

See accompanying notes to consolidated financial statements.

THQ APPALACHIA I, LLC AND SUBSIDIARIES

Consolidated Statement of Cash Flows

Year Ended December 31, 2021

Cash flows from operating activities:
Net income	$	18,343,802
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization		166,225,087
Amortization of deferred financing costs		1,057,312
Exploration expense		9,115,394
Net loss on derivative instruments		489,443,915
Net cash received from derivative counterparties		(244,392,536	)
Accrued interest on senior note – affiliate		(1,393,787	)
Loss on sale of other property and equipment		4,256,119
Change in operating assets and liabilities:
Accounts receivable		(140,904,262	)
Accounts receivable – affiliate		(2,445,603	)
Prepaid expenses		(251,838	)
Accounts payable and accrued expenses		6,786,748
Affiliate payables		77,849,509
Litigation reserve		(200,000	)
Decrease in gas imbalance		(3,954,245	)
Net cash provided by operating activities		379,535,615
Cash flows from investing activities:
Net cash paid for acquisition of oil and natural gas properties		(22,314,350	)
Additions to oil and natural gas properties		(295,620,728	)
Acquisition of High Road Resources, LLC		(22,664,186	)
Proceeds from sale of other property and equipment		524,098
Net cash used in investing activities		(340,075,166	)
Cash flows from financing activities:
Proceeds from revolving credit facility		70,000,000
Payments on revolving credit facility		(58,000,000	)
Repayment on note payable - affiliate		(35,000,000	)
Deferred financing costs		(603,349	)
Net cash used in financing activities		(23,603,349	)
Net increase in cash, cash equivalents, and restricted cash		15,857,100
Cash, cash equivalents, and restricted cash, beginning of period		18,147,438
Cash, cash equivalents, and restricted cash, end of period	$	34,004,538
Supplemental disclosure of cash flow information:
Cash paid for interest	$	20,754,120
Cash paid for interest - affiliate		4,512,875
Noncash investing activities:
Noncash additions to oil and natural gas properties	$	75,037,911
Noncash financing activities:
Contribution of assets by affiliate (note 10)	$	1,000,172

See accompanying notes to consolidated financial statements.

THQ APPALACHIA I, LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

(1)

Organization and Description of Business

THQ Appalachia I, LLC (the Company) is an energy company engaged in the acquisition, development and exploitation of conventional and unconventional oil and natural gas assets in the Appalachia Basin in the Northeastern United States and focused on the Marcellus and Point Pleasant shale formations. Its executive offices are located in Fort Worth, Texas.

The operations of the Company are governed by the provisions of a Limited Liability Company Agreement (the Agreement) dated July 23, 2014, as amended and as executed by and among its members. The Company’s majority member is Q-TH Appalachia (VI) Investment Partners, LLC (Quantum), with Radler 2000, LP (R2K) and certain members of management comprising the remaining capital members. The Agreement includes specific provisions with respect to the maintenance of the capital accounts of each of the Company’s members (see note 11).

(2)

Summary of Significant Accounting Policies

(a)

Basis of Accounting and Presentation

The accounts are maintained using the accrual basis of accounting and the consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) and are stated in United States dollars.

The accompanying consolidated financial statements include the accounts of THQ Appalachia I, LLC and its wholly owned subsidiaries TH Exploration, LLC, TH Exploration II, LLC, TH Exploration III, LLC, TH Exploration IV, LLC, CLR Exploration, LLC, and THQ Marketing, LLC. All significant intercompany balances and transactions have been eliminated in consolidation.

(b)

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect certain reported amounts in the consolidated financial statements and accompanying notes. The estimates that are and will be particularly significant to the consolidated financial statements include estimates of the Company’s reserves of oil, natural gas and natural gas liquids (NGLs), future cash flows from oil and natural gas properties, depreciation, depletion and amortization, asset retirement obligations, and fair values of assets acquired and liabilities assumed. As future events and their effects cannot be determined with precision, actual results could differ from these estimates and assumptions. These disclosures are material to the Company’s consolidated financial statements.

(c)

Risks and Uncertainties

Historically, the markets for natural gas, NGLs, and oil have experienced significant price fluctuations. Price fluctuations can result from variations in weather, levels of production in the region, availability of transportation capacity to other regions of the country, and various other factors. Increases or decreases in the prices the Company receives for its production could have a significant impact on the Company’s future results of operations and reserve quantities.

THQ APPALACHIA I, LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

The borrowing base under the Revolving Credit Facility discussed in note 5 may be reduced if commodity prices decline, which could hinder or prevent the Company from meeting future capital needs. The borrowing base under the Revolving Credit Facility was $690 million as of December 31, 2021. The borrowing base is subject to potential reductions based on a variety of factors such as commodity prices, operating difficulties, decline in reserves, lending requirements or regulations, or for any other reasons. The Company cannot be certain that funding will be available if needed, and to the extent required, on acceptable terms. In the event of a decrease in the borrowing base due to declines in commodity prices or otherwise, the Company may be unable to meet obligations as they come due and could be required to repay any indebtedness in excess of the redetermined borrowing base. As a result, the Company may be unable to implement the drilling and development plan, make acquisitions or otherwise carry out the Company’s business plan, which could have a material adverse effect on the financial condition and results of operations and impair the Company’s ability to service the indebtedness. The borrowing base is redetermined bi-annually by the lenders each May and October based on certain factors, including the Company’s reserves and hedge position. The borrowing base was redetermined in May 2022 to be $850 million, with the next borrowing base redetermination scheduled to occur in October 2022.

The Company relies on IT systems to conduct business, as well as systems of third-party vendors. These systems are subject to possible security breaches and cyber-attacks. Cyber-attacks are becoming more sophisticated, and U.S. government warnings have indicated that infrastructure assets, including pipelines, may be specifically targeted by certain groups. These attacks include, without limitation, malicious software, attempts to gain unauthorized access to data, and other electronic security breaches. These attacks may be perpetrated by state-sponsored groups, criminal organizations, or private individuals. These cybersecurity risks include cyber-attacks on the Company and third parties who provide material services. In addition to disrupting operations, cybersecurity breaches could also affect the Company’s ability to operate or control facilities, render data or systems unusable, or result in the theft of sensitive, confidential or customer information. These events could also damage the Company’s reputation, and result in losses from remedial actions, loss of business or potential liability to third parties. The Company carries insurance specifically for cybersecurity events. However, the proceeds of any such insurance may not be paid in a timely manner and may be insufficient if such an event were to occur. Increasing scrutiny and changing expectations from stakeholders with respect to our environment, social, and governance practices may impose additional costs on us or expose us to new or additional risks.

(d)

Cash and Cash Equivalents

The Company considers all cash and highly liquid investments with original maturities of three months or less when purchased to be cash equivalents.

(e)

Restricted Cash

The amount of restricted cash reflected in long-term assets represents the amount of cash collateral the Company has posted in support of a letter of credit on the Company’s behalf to the pipeline company with which the Company has a firm transportation commitment shown in note 7.

(f)

Accounts Receivable

The Company’s accounts receivable are primarily from purchasers of oil and natural gas. The Company extends credit as part of normal business procedures based on management’s assessment of credit worthiness. The Company records an allowance for doubtful accounts based on the age of accounts receivables and historical trends, as well as by specifically identifying receivables that may be uncollectible based upon the financial condition of the counterparty and other relevant facts and circumstances. The Company had no reserve as of December 31, 2021 and has experienced no losses since 2016.

THQ APPALACHIA I, LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

(g)

Oil and Natural Gas Properties

The Company follows the successful efforts method of accounting for its oil and natural gas properties, whereby costs of productive wells, developmental dry holes and productive leases are capitalized into appropriate groups of properties based on geographical and geological similarities. These capitalized costs are amortized using the unit-of-production method based on estimated proved reserves. Proceeds from sales of properties will be credited to property costs, and a gain or loss will be recognized when a significant portion of an amortization base is sold or abandoned.

Exploration expense, including geological and geophysical expenses and delay rentals, are charged to expense as incurred. Exploratory drilling costs, including the cost of stratigraphic test wells, are initially capitalized but charged to exploration expense if and when the well is determined to be nonproductive. The acquisition costs of unproved acreage are initially capitalized and are carried at cost, net of accumulated impairment provisions, until such leases are transferred to proved properties or charged to exploration expense as impairments of unproved properties. The Company had no significant costs which had been deferred for longer than one year at December 31, 2021. The Company charged $9.1 million to exploration expense in 2021. The exploration expense includes $6.0 million due to dry hole expenses and $3.1 million due to the expiration of certain oil and natural gas leases.

The Company evaluates the carrying amount of its proved natural gas, NGLs, and oil properties for impairment on a geological reservoir basis whenever events or changes in circumstances indicate that a property’s carrying amount may not be recoverable. If the carrying amount exceeds the estimated undiscounted future cash flows, the Company would estimate the fair value of its properties and record an impairment charge for any excess of the carrying amount of the properties over the estimated fair value of the properties. Factors used to determine fair value may include estimates of proved reserves, future commodity prices, future production estimates, anticipated capital expenditures, and a commensurate discount rate. Because estimated undiscounted future cash flows exceeded the carrying value of the Company’s proved properties, it has not been necessary for the Company to determine the fair value of its properties under GAAP for successful efforts accounting. As a result, the Company has not recorded any impairment expenses associated with its proved properties during the year ended December 31, 2021.

(h)

Gathering Facilities

Expenditures for construction, installation, major additions, and improvements to property, plant, and equipment that is not directly related to production are capitalized, whereas minor replacements, maintenance, and repairs are expensed as incurred. Gathering pipelines and compressor stations are depreciated using the straight-line method over their estimated useful lives of 20 years. Depreciation expense for gathering pipelines, compressor stations, and water handling and treatment systems was $0.8 million in 2021. A gain or loss is recognized upon the sale or disposal of property and equipment.

THQ APPALACHIA I, LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

(i)

Other Property and Equipment

Other property and equipment consists primarily of field equipment, facilities, and office equipment and are recorded at cost. Major renewals and betterments are capitalized while repairs and maintenance are charged to expense as incurred. The costs of assets retired or otherwise disposed of and the applicable accumulated depreciation are removed from the accounts, and any gain or loss is included in operating income in the accompanying statements of operations.

Other property and equipment, including major replacements and improvements, are capitalized and are depreciated using the straight-line method over the estimated useful lives of 3 to 7 years. Depreciation expense for the other property and equipment was $0.3 million in 2021.

(j)

Provision for Depreciation, Depletion & Amortization (DD&A)

The Company computes its provision for DD&A on a unit-of-production method. Each quarter, the Company uses the following formulas to compute the provision for DD&A for each of its producing properties (or appropriate groups of properties based on geographical and geological similarities):

DD&A Rate = Unamortized Cost / Beginning of Period Reserves
Provision for DD&A = DD&A Rate x Current Period Production

Reserve estimates have a significant impact on the DD&A rate. If reserve estimates for a property or group of properties are revised downward in future periods, the DD&A rate for that property or group of properties will increase as a result of the revision. Alternatively, if reserve estimates are revised upward, the DD&A rate will decrease.

(k)

Impairment of Unproved Properties

At each year end, the Company reviews its unproved oil and natural gas properties to determine if there has been, in the Company’s judgment, impairment in value of each prospect that the Company considers individually significant. To the extent that the carrying cost of a prospect exceeds its estimated fair value, the Company makes a provision for impairment of unproved properties, and records the provision as abandonments and impairments within exploration expense on its statement of income. If the value is revised upward in a future period, the Company does not reverse the prior provision and continues to carry the prospect at a net cost that is lower than its estimated value. If the value is revised downward in a future period, an additional provision for impairment is made in that period. As stated in note 2(g), the Company charged $9.1 million to exploration expense in 2021. The exploration expense includes $6.0 million for dry hole expenses and $3.1 million due to the expiration of certain oil and natural gas leases.

(l)

Oil and Natural Gas Reserves

Reserve engineering is a subjective process of estimating underground accumulations of oil and natural gas that cannot be measured in an exact manner. The accuracy of a reserve estimate depends on the quality of available geological and engineering data, the precision of and the interpretation of that data, and judgment based on experience and training. Annually, the Company engages independent petroleum engineering firms to independently prepare estimates of its oil and natural gas reserves.

(m)

Deferred Financing Costs

Deferred financing costs represent loan origination fees and are offset against the related debt instrument in the consolidated balance sheets. These costs are amortized over the term of the related debt instrument using the effective interest method. The Company charges expense for unamortized deferred financing costs if credit facilities are retired prior to their maturity date. At December 31, 2021, the Company had $2.3 million of unamortized deferred financing costs that are netted against the Company’s debt balances. The amount amortized was $1.1 million for the year ended December 31, 2021.

THQ APPALACHIA I, LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

(n)

Derivative Financial Instruments

In order to manage its exposure to natural gas, NGLs, and oil price volatility, the Company enters into derivative transactions from time to time, including commodity swap agreements, basis swap agreements, collar agreements, and other similar agreements relating to the price risk associated with a portion of its production. To the extent legal right of offset exists with a counterparty, the Company reports derivative assets and liabilities on a net basis. The Company has exposure to credit risk to the extent that the counterparty is unable to satisfy its settlement obligations. The Company actively monitors the creditworthiness of counterparties and assesses the impact, if any, on its derivative position.

The Company records derivative instruments on the consolidated balance sheets as either an asset or liability measured at fair value and records changes in the fair value of derivatives in current earnings as they occur. Cash settlements for derivatives and changes in the fair value of commodity derivatives are reflected in gain (loss) on derivative instruments on the Company’s consolidated statements of income. The Company’s derivatives have not been designated as hedges for financial accounting purposes.

(o)

Asset Retirement Obligations

The Company estimates the present value of the amount it will incur to plug, abandon and remediate its producing properties at the end of their productive lives in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 410, Asset Retirement and Environmental Obligations. The Company will compute its liability for asset retirement obligations by calculating the present value of estimated future cash flows related to each property. This will require the Company to use significant assumptions, including current estimates of plugging and abandonment costs, annual inflation of these costs, the productive lives of wells and its risk-adjusted interest rate. Changes in any of these assumptions can result in significant revisions to the estimated asset retirement obligations.

In accordance with FASB ASC 410, an asset retirement obligation is recorded as a liability at its estimated present value at the asset’s inception, with an offsetting increase to producing properties in the accompanying balance sheets which is allocated to expense over the useful life of the asset. Periodic accretion of the discount on asset retirement obligations is recorded as an expense in depreciation, depletion, and amortization in the accompanying consolidated statement of income.

Removal and restoration costs associated on the retirement of gathering facilities and water delivery pipelines are undeterminable as the Company cannot predict when these facilities would be decommissioned or become obsolete. As such, no asset retirement obligation has been recorded related to gathering facilities as of December 31, 2021.

THQ APPALACHIA I, LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

(p)

Revenue Recognition

The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers. The ASC 606 core principle is that a company will recognize revenue when it transfers promised goods or services to customers and in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services.

Our revenues are primarily derived from the sale of natural gas and oil production, as well as the sale of NGLs that are extracted from our natural gas. Sales of natural gas, NGLs, and oil are recognized when we satisfy a performance obligation by transferring control of a product to a customer. Payment is generally received in the month following the sale.

Under our natural gas sales contracts, we deliver natural gas to the purchaser at an agreed upon delivery point where title to the product passes to the purchaser. Natural gas is transported from our wellheads to delivery points specified under sales contracts. Our sales contracts provide that we receive a specific index price adjusted for pricing differentials. We transfer control of the product at the delivery point and recognize revenue based on the contract price. A receivable or liability is recognized only to the extent that the Company has an imbalance on a specific property greater than the expected remaining proved reserves.

NGLs, which are extracted from natural gas through processing, are either sold by a third party marketing firm or by the processor under processing contracts. For NGLs sold on behalf of us by a third party marketing firm, our sales contracts provide that we deliver the product to the purchaser at an agreed upon delivery point and that we receive a specific index price adjusted for pricing differentials. We transfer control of the product to the purchaser at the delivery point and recognize revenue based on the contract price. For NGLs sold by the processor, our processing contracts provide that we transfer control to the processor at the tailgate of the processing plant and we recognize revenue based on the price received from the processor.

Under our oil sales contracts, we generally sell oil to purchasers and collect a contractually agreed upon index price, net of pricing differentials. We recognize revenue based on the contract price when we transfer control of the product to a purchaser.

(q)

Concentrations of Credit Risk

The Company’s revenues are derived principally from uncollateralized sales to purchasers in the oil and natural gas industry. The concentration of credit risk in a single industry affects the Company’s overall exposure to credit risk because purchasers may be similarly affected by changes in economic and other conditions. The Company has a large, investment-grade purchaser who has served as the Company’s major customer accounting for approximately 33% of total revenue in 2021. Five other large, investment-grade companies comprise an additional 27% of total revenue in 2021. The Company has not experienced any losses on its receivables from the new purchasers and believes its counterparties represent acceptable credit risk.

The Company is also exposed to credit risk on its commodity derivative portfolio. Any default by the counterparty to these derivative contracts when they become due could have a material adverse effect on the Company’s financial condition and results of operations. The Company has economic hedges in place with several of its lenders under the Company’s Credit Facility. The fair value of the Company’s commodity derivative contracts was a net liability of $266.9 million at December 31, 2021. The Company believes that its lenders represent acceptable credit risk.

THQ APPALACHIA I, LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

The Company maintains deposits primarily in two financial institutions, which may at times exceed amounts covered by insurance provided by the U.S. Federal Deposit Insurance Corporation (FDIC). The Company has not experienced any losses related to amounts in excess of FDIC limits.

(r)

Fair Value Measurement

FASB ASC 820, Fair Value Measurements and Disclosures, establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under FASB ASC 820 are described below:

Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access.

Level 2: Inputs to the valuation methodology include:

Quoted prices for similar assets or liabilities in active markets;

Quoted prices for identical or similar assets or liabilities in inactive markets;

Inputs other than quoted prices that are observable for the asset or liability;

Inputs that are derived principally from or corroborated by observable market data by correlation or other means;

If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.

Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurements.

(s)

Fair Value of Financial Instruments

In accordance with the reporting requirements of FASB ASC 825, Financial Instruments, the Company calculates the fair value of its assets and liabilities which qualify as financial instruments under this statement and includes this additional information in the notes to consolidated financial statements when the fair value is different than the carrying value of those financial instruments. The estimated fair value of accounts receivable, accounts payable, and revolving credit facility approximates the carrying amount due to the relatively short maturity of these instruments. None of these instruments are held for trading purposes.

(t)

Fair Value on a Non-Recurring Basis

The Company follows the provisions of ASC Topic 820, Fair Value Measurement, for nonfinancial assets and liabilities measured at fair value on a nonrecurring basis. As it relates to the Company, ASC Topic 820 applies to the initial recognition of AROs, for which fair value is used.

THQ APPALACHIA I, LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

(u)

Relationship with Affiliate

The Company has an ongoing business relationship with an affiliate, Tug Hill Operating, LLC (THO). THO is responsible for acquisitions, drilling and operation of wells owned by the Company. As it incurs costs on behalf of the Company for these operations, THO bills the Company through its joint interest billing (JIB) process; and the Company reimburses THO for these costs at least monthly. THO is also responsible for the administration of the Company’s business. In exchange for these services, the Company pays a quarterly fee that includes (a) THO employees’ time and related expenses charged to the Company for the operation of its oil and natural gas properties, (b) an allocated amount of THO overhead expense calculated based on the number of hours THO employees spend working on Company projects, and (c) an additional percentage markup of the overall total of (a) and (b) to cover benefits and other employee-related costs and any unforeseen or difficult to allocate costs. The Company’s board approves the operating budgets. For the year ended December 31, 2021, THO billed the Company $429.7 million through the JIB process. The amount due to THO for these services, which is included in the Company’s affiliate payable balance was $111.4 million as of December 31, 2021. Allocations consist of $23.7 million relating to acquisition of oil and natural gas properties, $19.6 million of lease operating expenses, $11.6 million in salaries and bonus for the operation of its oil and natural gas properties, $1.0 million for overhead expenses, $6.5 million of direct general and administrative expenses, and $367.3 million of capital expenditures for the period ended December 31, 2021.

THO collects certain revenues from customers on behalf of the Company. The amount due from THO, which is included in the Company’s oil and gas accounts receivable balance was $112.8 million as of December 31, 2021.

The Company incurred $75.2 million in gathering, processing and transportation for the period ended December 31, 2021, payable to an affiliate, THQ-XCL Holdings I, LLC (XCL), a Quantum and R2K controlled entity.

For the year ended December 31, 2021, the Company paid $4.6 million and $26.3 million in lease bonuses income and royalties, respectively, to an affiliate, Stone Hill Minerals Holdings I, LLC (SHMH), a Quantum and R2K controlled entity. On December 3, 2021, the Company paid the $39.5 million in principal and interest on the Senior Note with Stone Hill Mineral Holdings, LLC, referenced in footnote 5, herein. As of December 31, 2021, the Company has no remaining balance under this affiliate note payable.

(v)

Income Taxes

The Company is a limited liability company and, therefore, is treated as a flow through entity for federal income tax purposes. As a result, the net taxable income of the Company and any related tax credits, for federal income tax purposes, are allocated to the members and are included in the members’ tax returns even though such net taxable income or tax credits may not have actually been distributed. Accordingly, no federal tax provision has been made in the financial statements of the Company. However, Texas imposes an entity-level tax on all forms of business regardless of federal entity classification. At December 31, 2021, the Company had not accrued a liability for the Texas franchise tax as the liability, if any, is not expected to be material. The Company applies the provisions of ASC Topic 740, Income Taxes (“ASC 740”), which clarifies the accounting and disclosure for uncertainty in tax positions. The Company analyzed its tax filing positions in the U.S. federal, state and local jurisdictions where it is required to file income tax returns, for all open tax years. Based on this review, no liabilities for uncertain income tax positions were required to have been recorded pursuant to ASC 740. The Company files its tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by U.S. federal and certain state and local tax regulators. As of December 31, 2021, the Company's U.S. federal income tax returns and state and local returns are open under the normal three-year statute of limitations and therefore subject to examination.

THQ APPALACHIA I, LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

(w)

Recent Accounting Pronouncements

In February 2016, the FASB Issued ASU 2016-02, Leases (Topic 842), which requires lessees to recognize a lease liability and a right-of-use asset for all leases, including operating leases, with a term greater than 12 months on the balance sheet. The provisions of ASU 2016-02 also modify the definition of a lease and outline the requirements for recognition, measurement, presentation, and disclosure of leasing arrangements by both lessees and lessors. This ASU is to be adopted using a modified retrospective approach. In May 2020, the FASB elected to defer the effective date for private companies to fiscal years beginning after December 15, 2021 and for interim periods within fiscal years beginning after December 15, 2022. The Company is currently evaluating the effect that adopting this guidance will have on its consolidated financial statements.

(3)

Property and Equipment

(a)

Oil and Natural Gas Properties

Since inception, the Company has been involved in acquiring and leasing oil and natural gas properties in the southwest Appalachian Basin in the Northeastern United States.

Oil and natural gas properties consist of the following at December 31, 2021:

Proved properties	$	1,703,448,017
Accumulated depreciation, depletion and amortization		(388,185,831	)
Net		1,315,262,186
Unproved properties		238,878,646
Exploration and impairment		(9,115,394	)
Net		229,763,252
Total oil and natural gas properties, at cost, using the successful efforts method, net	$	1,545,025,438

Depreciation, depletion, and amortization expense for proved oil and natural gas properties was $164.7 million for the year ended December 31, 2021. Exploration and abandonment and write off was $9.1 million for the year ended December 31, 2021. Additions to capitalized exploratory well costs that are pending the determination of proved reserves were $68.8 million for the year ended and as of December 31, 2021. Capitalized exploratory well costs that were reclassified to wells, equipment and facilities based on the determination of proved reserves were $42.9 million for the year ended December 31, 2021, which excludes costs that were incurred in the current year. The Company had no significant costs which had been deferred for longer than one year as of December 31, 2021.

THQ APPALACHIA I, LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

On June 1, 2021, the Company sold the 80% working interest in CLR Exploration, LLC to a third party for approximately $0.1 million, which resulted in a loss of $4.7 million on the sale.

On April 1, 2021, THQA settled a claim regarding disputed royalty payments. The total settlement was for $6.5 million which consisted of a payment of $5.2 million to purchase the mineral rights owned by the plaintiffs as well as a settlement payment of $1.3 million for alleged damages. The majority of mineral rights purchased are included in THQA proved properties and the payment for damages is included in general and administrative expenses.

On July 9, 2021, the Company and XcL Midstream Operating, LLC (“XcLM”), entities under common control, acquired the 100% interest in High Road Minerals, LLC, High Road Operating, LLC, and High Road Midstream, LLC from High Road Resources Holdings, LLC, for $27.8 million in cash consideration. The assets are located in Marshall and Wetzel Counties, West Virginia, Harrison and Jefferson Counties, Ohio, and Greene County, Pennsylvania. The Company purchased the assets associated with High Road Operating, LLC and High Road Minerals, LLC for $22.7 million cash consideration. On behalf of XcLM, the Company purchased the assets of High Road Midstream, LLC for $5.1 million. The payment of $5.1 million was reimbursed by XcLM in August 2021.

(b)

Gathering Facilities and Other Property and Equipment

Gathering facilities and other property and equipment consists of the following at December 31, 2021:

Gathering facilities	$	14,456,790
Other property and equipment		1,868,753
Total capitalized costs		16,325,543
Accumulated depreciation		(1,809,426	)
Total net capitalized costs	$	14,516,117

On December 10, 2021, the Company’s board approved the purchase of the water pipelines, water pipeline systems, and all associated water infrastructure, including the corresponding rights-of-way in Marshall and Wetzel Counties, WV, Belmont and Monroe Counties, OH and Greene County, PA, (the “XcL Water System”), from XcL Midstream Operating, LLC (“XcLM”) in return for the sale of all gas and condensate gathering assets, including the corresponding rights-of-way, (the “The Legacy Gathering System”) to XcLM. This transaction was treated as an exchange of assets between entities under common control. The net book value of the XcL Water System was approximately $1.0 million in excess of the Legacy Gathering System’s carrying value; this excess amount was treated as a capital contribution to the Company.

THQ APPALACHIA I, LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

Depreciation expense for gathering facilities and other property and equipment was $1.1 million for the year ended December 31, 2021.

(4)

Asset Retirement Obligations

The Company will recognize the fair value of its asset retirement obligations related to the plugging, abandonment, and remediation of oil and natural gas producing properties. The present value of the estimated asset retirement costs will be capitalized as part of the carrying amount of the related long-lived assets. The following is a reconciliation of the Company’s asset retirement obligations for the year ended December 31, 2021:

Balance, beginning of period	$	3,665,219
Obligations incurred from wells drilled and assets acquired		1,425,709
Revisions to prior estimates		1,994,235
Dispositions		(611,170	)
Accretion expense		466,407
Balance, end of period	$	6,940,400

(5)

Long-Term Debt

Senior Secured Revolving Credit Facility

The Company has a senior secured revolving bank credit facility (the Credit Facility) with a group of large, commercial lenders. Borrowings under the Credit Facility are subject to borrowing base limitations based on the collateral value of the Company’s proved properties and commodity hedge positions and are subject to regular semiannual redeterminations or more frequently if requested by the Company. The borrowing base was redetermined in November 2021 to be $690 million. As of December 31, 2021, the Company had an outstanding balance under the Credit Facility of $550 million, with a weighted average interest rate of approximately 3.61%. The amount reflected in the Company’s December 31, 2021 consolidated balance sheet is shown net of the debt issuance costs of $2.3 million. The maturity date of the Credit Facility is October 7, 2023.

The Credit Facility is secured by liens on substantially all of the Company’s properties and guarantees from the Company’s restricted subsidiaries, as applicable. The Credit Facility contains certain covenants, including restrictions on indebtedness and dividends and requirements with respect to working capital and leverage coverage ratios. Interest is payable at a variable rate based on LIBOR or the prime rate, determined by the Company’s election at the time of borrowing. The Company was in compliance with all of the financial covenants under the Credit Facility as of December 31, 2021.

Commitment fees on the unused portion of the Credit Facility are due quarterly at a rate of 0.50% of the unused portion, based on utilization.

THQ APPALACHIA I, LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

Senior Note

On December 3, 2021, the Company paid the outstanding balance of $39.5 million in principal and interest on the Senior Note with Stone Hill Minerals Holdings, LLC. As of December 31, 2021, the Company has no remaining balance under the Senior Note.

(6)

Derivative Instruments

The Company periodically enters into natural gas, NGLs, and oil derivative contracts with counterparties to hedge the price risk associated with a portion of its production. These derivatives are not held for trading purposes. To the extent that changes occur in the market prices of natural gas, NGLs, and oil, the Company is exposed to market risk on these open contracts. This market risk exposure is generally offset by the change in market prices of natural gas, NGLs, and oil recognized upon the ultimate sale of the Company’s production.

During the year ended December 31, 2021, the Company was party to various natural gas fixed price swap contracts and costless collars. When actual commodity prices exceed the fixed price provided by the swap contracts, the Company pays the excess to the counterparty. When actual commodity prices are below the contractually provided fixed price, the Company receives the difference from the counterparty. When actual commodity prices fall within the band provided by the costless collars, the Company receives the actual prices from the counterparty. When actual commodity prices fall outside the band provided by the costless collars, the Company receives the price provided by the collar from the counterparty and pays the actual price to the counterparty.

In addition, the Company has entered into basis swap contracts in order to hedge the difference between the New York Mercantile Exchange (NYMEX) index price and a local index price. The Company’s derivative swap contracts have not been designated as hedges for accounting purposes; therefore, all gains and losses are recognized in the Company’s statements of operations.

THQ APPALACHIA I, LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

As of December 31, 2021, the Company’s fixed price natural gas and oil swap positions were as follows:

	2022			2023			2024
NYMEX Henry Hub Swaps:
Volume (MMbtu/day)		356,890			35,000			—
Average price ($/MMBtu)	$	2.42			2.47			—
NYMEX Henry Hub Long Puts:
Volume (MMbtu/day)		120,000			155,000			100,000
Average price ($/MMBtu)	$	2.69			2.67			2.80
NYMEX Henry Hub Short Calls:
Volume (MMbtu/day)		120,000			155,000			100,000
Average price ($/MMBtu)	$	4.35			3.61			3.88
Columbia Gas (TCO) Basis Swaps:
Volume (MMbtu/day)		42,500			—			—
Average price ($/MMBtu)	$	(0.62	)		—			—
Dominion South Basis Swaps:
Volume (MMbtu/day)		200,000			190,000			40,000
Average price ($/MMBtu)	$	(0.71	)		(0.75	)		(0.72	)
WTI Swaps:
Volume (Bbls/day)		4,966			1,750			900
Average price ($/Bbl)	$	54.53			58.51			63.25
Mt. Blv. Propane Swaps:
Volume (Bbls/day)		4,500			—			—
Average price ($/gallon)	$	0.62			—			—

The following is a summary of derivative fair value gains which are recorded in the consolidated statements of operations included in net loss on derivative instruments for the year ended December 31, 2021:

Cash settlement of derivative contracts	$	(244,392,536	)
Noncash change in derivative fair value		(245,051,379	)
Net loss on derivative instruments	$	(489,443,915	)

THQ APPALACHIA I, LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

The following is a summary of the fair values of the Company’s derivative instruments and where such values are recorded in the consolidated balance sheet as of December 31, 2021:

	Balance sheet
	location	Fair value
Commodity derivatives:
Commodity contracts	Current assets	$	18,655,632
Commodity contracts	Long-term assets		30,957,358
Total derivative assets			49,612,990
Commodity contracts	Current liabilities		250,177,807
Commodity contracts	Long-term liabilities		66,297,141
Total derivative liabilities			316,474,948
Net derivatives		$	(266,861,958	)

The fair value of commodity derivative instruments was determined using Level 2 inputs. The Company classifies the fair value amounts of derivative financial instruments by commodity contract as net current or noncurrent assets or liabilities.

(7)

Commitments

The following is a schedule of future minimum payments for firm transportation, drilling rig and processing, gathering and compression agreements as of December 31, 2021.

			Processing,
			gathering		Drilling
	Firm		and		rigs and
	transportation		compression		completion
	(a)		(b)		(c)		Total
Year ending December 31:
2022	$	36,500,000		2,181,090		16,121,995		54,803,085
2023		36,500,000		1,017,559		—		37,517,559
2024		36,600,000		—		—		36,600,000
2025		36,500,000		—		—		36,500,000
2026		36,500,000		—		—		36,500,000
Thereafter		258,800,000		—		—		258,800,000
Total	$	441,400,000		3,198,649		16,121,995		460,720,644

THQ APPALACHIA I, LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

(a)

Firm Transportation

The Company has entered into firm transportation agreements with a pipeline in order to facilitate the delivery of its production to market. This contract commits the Company to transport minimum daily natural gas volumes at negotiated rates, or pay for any deficiencies at specified reservation fee rates once the pipeline goes into service. The amounts in this table represent the Company’s minimum daily volumes at the reservation fee rate. The values in the table represent the gross amounts that the Company is committed to pay; however, the Company will record in the consolidated financial statements its proportionate share of costs based on its net revenue interest.

(b)

Processing, Gathering, and Compression Service Commitments

The Company has entered into various long-term gas gathering and processing agreements for certain of its production that will allow it to realize the value of its NGLs. The minimum payment obligations under the agreements are presented in the table. Actual payments under these agreements will differ from the amounts shown in the table above as the Company expects to deliver volumes in excess of the minimum commitment. These commitments have varying fees with escalation clauses based on annual percentage change in Oil PPI.

(c)

Drilling Rig and Completion Service Commitments

The Company has obligations under agreements with service providers to procure drilling and completion services. The values in the table represent the gross amounts that the Company is committed to pay; however, the Company will record in the consolidated financial statements its proportionate share of costs based on its working interest.

(d)

Office and Equipment Leases

The Company leases various office space and equipment, as well as field equipment, under operating lease arrangements. Rental expense under operating leases was immaterial for 2021.

(8)

Contingencies

Litigation

The Company is subject to a lawsuit wherein plaintiffs allege that the Company breached its contract by improperly deducting production and post-production costs from the royalties to which plaintiffs claim they are entitled. The Company is vigorously defending itself and does not believe that a loss is either probable or estimable.

As part of the High Road acquisition (see note 3a), the purchase price included a $0.7 million litigation reserve for litigation involving alleged non-payment of lease bonuses and disputes over ownership rights. The Company has successfully defended and settled a portion of the claims for $0.3 million. The Company has a remaining ligation reserve of $0.4 million at December 31, 2021 for these claims.

On April 1, 2021, THQA settled a claim regarding disputed royalty payments. The total settlement was for $6.5 million which consisted of a payment of $5.2 million to purchase the mineral rights owned by the plaintiffs as well as a settlement payment of $1.3 million for alleged damages. The Company received a reimbursement of $0.6 million, a release from the escrow account related to the acquisition of related properties. The majority of mineral rights purchased are included in THQA proved properties and the payment for damages is included in general and administrative expenses.

THQ APPALACHIA I, LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

On April 22, 2021, THQA settled a claim which involved overriding royalty interests on leases that THQA had acquired from another energy company. The settlement paid to the plaintiff to fully resolve this matter was $4 million and is included in general and administrative expenses.

The Company is subject to certain other claims and litigation arising in the normal course of business. In the opinion of management, the outcome of such matters will not have a material adverse effect on the results of operations or financial position of the Company.

Environmental Remediation

Various federal, state, and local laws and regulations covering the discharge of materials into the environment, or otherwise relating to the protection of the environment, may affect the Company’s operations and the costs of its crude oil and gas natural exploration, development, and production operations. The Company does not anticipate that it will be required in the near future to expend significant amounts due to environmental laws and regulations, and accordingly no reserves have been recorded.

(9)

Other Revenue

During 2021, the Company experienced gas imbalance losses of $4.0 million, which are reflected in other revenues in the Company’s consolidated statements of income.

The Company also received fees from third parties for road and other asset use agreements during 2021.

The Company began purchasing and reselling natural gas from third-parties to take advantage of new pipeline capacity that became available during 2019. The Company was able to capture small margins by buying at a point on the new pipeline system and reselling it at a different point on the system. The gross proceeds are also shown in other revenue.

(10)

Related Party Transactions and Other Income

On December 10, 2021, the Company’s board approved the purchase of the water pipelines, water pipeline systems, and all associated water infrastructure, including the corresponding rights-of-way in Marshall and Wetzel Counties, WV, Belmont and Monroe Counties, OH and Greene County, PA, (the “XcL Water System”), from XcL Midstream Operating, LLC (“XcLM”) for the sale of all gas and condensate gathering assets, including the corresponding rights-of-way, (the “The Legacy Gathering System”) to XcLM. This transaction was treated as an exchange of assets between entities under common control. The net book value of the XcL Water System was approximately $1.0 million in excess of the Legacy Gathering System’s carrying value; this excess amount was treated as a capital contribution to the Company. The Company will reimburse XcLM for all costs associated with in process construction projects on the XcL Water System.

(11)

Membership Interests

There are two classes of membership interest – capital interests and management incentive interests. Capital interests held by Quantum, R2K and members of management have full voting rights and rights to share in the distributions of the Company. As described more fully in note 12, management incentive interests can be issued under the Incentive Pool Plan and are nonvoting with no rights to share in distributions until the capital contributed interests have earned the full base return.

THQ APPALACHIA I, LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

The members have no liability for the debts, obligations and liabilities of the Company, except as expressly required in the agreement. The Company shall dissolve and its affairs shall be wound up upon the earliest to occur of (a) the expiration of its term on December 20, 2025, if not extended by the members, (b) election by the Board of Directors by majority approval at any time or (c) entry of a decree of judicial dissolution of the Company under the Delaware Limited Liability Company Act.

The timing and amounts of distributions, other than tax advances, are determined by the Board of Directors. Capital contributions will receive a base return of 8% on their contributions (base return) which continues accruing until distributions exceed the total capital contributions plus the 8% base return. The first 10% of R2K’s Capital Interest will be treated as un-promoted capital (R2K’s Un-promoted Capital Interest). Distributions to members’ capital that is promoted is subject to certain distribution flips, whereby, distributions will be made in proportion to the agreed upon sharing ratios. Tax advances may be made quarterly based on projections of the entity’s taxable income for the year.

On December 10, 2021, the Company’s board approved the exchange of assets between TH Exploration II, LLC and XcLM, which are entities under common control. The net book value of the XcL Water System was approximately $1.0 million in excess of the Legacy Gathering System’s carrying value; this excess amount was treated as a capital contribution to the Company.

(12)

Management Incentive Unit Plan

Effective with the formation of the Company on July 23, 2014, the Company adopted an incentive unit plan, THQ (Appalachia I) Employee Holdings, LLC, (the Plan) to provide profit awards to employees (management incentive units). All of the incentive units are subject to vesting over five years, forfeiture, and termination. The management incentive units have no voting rights, do not have an exercise price and are automatically forfeited except in extenuating circumstances if and when such person’s status as an employee is terminated.

Compensation expense for these awards will be recognized when all performance, market, and service conditions are probable of being satisfied in general upon a vesting event, which is defined as (i) the sale of all or substantially all of the outstanding capital interests or assets of the Company, (ii) the time of any distribution by the Company after capital contributions of substantially all of the capital commitments have been made by the capital members, and the Board has determined that the Company will not raise additional capital, (iii) one year after the expiration of a lockup period in the event of a transfer of all or substantially all of the outstanding capital interests or assets of the Company to an individual, estate or a corporation, partnership, joint venture, limited partnership, limited liability company, trust, unincorporated organization, association or any other entity (Person) in exchange for publicly tradable securities of such Person; or two years after the expiration of a lockup period in the event that securities received in connection with the transfer constitute 15% or more of the total shares of such Person then outstanding.

THQ APPALACHIA I, LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

(13)

Oil and Gas Reserves Information (Unaudited)

The following supplementary information summarized presents the results of natural gas and oil activities in accordance with the successful efforts method of accounting for production activities.

(a)

Production Costs

The following tables present total aggregate capitalized costs and costs incurred related to natural gas, NGLs and oil production activities at December 31, 2021:

Capitalized costs
Proved properties	$	1,703,448,017
Accumulated depreciation, depletion and amortization		(388,185,831	)
Net		1,315,262,186
Unproved properties		238,878,646
Exploration and impairment		(9,115,394	)
Net		229,763,252
Total oil and natural gas properties, at cost, using the successful efforts method, net	$	1,545,025,438

Costs incurred (i)
Property acquisition costs:
Proved properties (ii)	$	16,369,921
Unproved properties (iii)		29,464,469
Development costs		336,773,446
Total costs incurred	$	382,607,836

(i)

Amounts exclude capital expenditures for gathering systems and other corporate assets as well as $5,953,437 of asset dispositions.

(ii)

Amounts include $16,126,958 of wells acquired in the High Road acquisition as referenced in note 3(a).

(iii)

Amounts include $7,670,870 of leases acquired in High Road acquisition as referenced in note 3(a).

THQ APPALACHIA I, LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

(b)

Results of Operations for Production Activities

The following table presents the results of operations related to natural gas, NGLs and oil production for the year ended December 31, 2021:

Sales of natural gas, NGLs and oil	$	965,870,012
Gathering, processing and transportation		(170,708,648	)
Production taxes		(48,988,200	)
Lease operating expenses		(20,341,051	)
Exploration		(9,115,394	)
Depreciation, depletion and amortization		(166,225,087	)
Loss on sale of other property and equipment		(4,256,119	)
Results of operation from producing activities	$	546,235,513

(c)

Reserves Information

Proved developed reserves represent only those reserves expected to be recovered from existing wells and support equipment. Proved undeveloped reserves represent proved reserves expected to be recovered from new wells after substantial development costs are incurred.

The Company’s estimate of proved natural gas, NGLs and crude oil reserves was prepared by Cawley, Gillespie & Associates, Inc. (“Cawley”), an independent consulting firm hired by management. Cawley, Gillespie & Associates, Inc. is a Texas Registered Engineering Firm (F-693), made up of independent registered professional engineers and geologists that have provided petroleum consulting services to the oil and gas industry for over 60 years. Cawley has estimated 100% of the total net natural gas proved reserves attributable to the Company’s interests as December 31, 2021 in accordance with the definitions and regulations of the U.S. Securities and Exchange Commission and, with the exclusion of future income taxes, conform to the FASB ASC No 932, Extractive Activities – Oil & Gas. Standard engineering and geoscience methods, or a combination of methods, including performance analysis, volumetric analysis, analogy, and material balance were utilized in the evaluation of reserves. All of the Company’s proved reserves are located in the United States.

The engineer primarily responsible for providing Company data necessary for the preparation of the reserves estimate holds a Bachelor of Science degree in Petroleum Engineering from Texas A&M University and has 17 years of experience in the oil and gas industry. To support the accurate and timely preparation and disclosure of its reserve estimates, the Company established internal controls over its reserve estimation processes and procedures, including the following: the price, heat content conversion rate and cost assumptions used in the economic model to determine the reserves are reviewed by management; division of interest and production volumes are reconciled between the system used to calculate the reserves and other accounting/measurement systems; and the reserves reconciliation between prior year reserves and current year reserves is reviewed by senior management.

THQ APPALACHIA I, LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

The following provides a roll forward of the total proved reserves, as well as proved developed and proved undeveloped reserves for the year ended December 31, 2021:

	Oil (Mbbls)			Gas (MMcf)			NGLs (Mbbls)			Mmcfe (i)
Proved developed and undeveloped reserves:
Beginning of period		22,166			2,130,866			125,690			2,754,049
Revisions of previous estimates		(7,153	)		199,427			(11,655	)		111,055
Extensions and discoveries		841			584,643			5,534			611,272
Acquisition of reserves		135			96,773			1,951			105,188
Production		(2,010	)		(177,393	)		(7,760	)		(219,714	)
End of period		13,979			2,834,316			113,760			3,361,850

Proved developed reserves:
Beginning of period		7,102			915,645			45,872			1,137,160
End of period		8,462			1,166,269			56,961			1,439,185

Proved undeveloped reserves:
Beginning of period		15,063			1,215,221			79,817			1,616,889
End of period		5,517			1,668,046			56,799			1,922,665

(i) NGLs were converted at a rate of one Mbbl to approximately 3.9 million cubic feet (MMcf) and oil was converted at a rate of one Mbbl to approximately 6 million cubic feet (MMcf).

The change in reserve during the year ended December 31, 2021 resulted from the following:

Revisions of previous estimates were primarily related to changes in oil and natural gas prices.

Extensions and discoveries consist of adding proved undeveloped reserves to locations classified as unproved at year-end and adding proved developed reserves from successful development wells drilled on locations outside the areas classified as proved at the previous year-end.

Acquisition of reserves includes additions related to the High Road acquisition reference in note 3(a).

THQ APPALACHIA I, LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

(d)

Standardized Measure of Discounted Future Net Cash Flow

The following table sets forth the standardized measure of discounted future net cash flows relating to proved reserves as of December 31, 2021:

Future cash inflows	$	11,618,602,619
Future production costs		(1,398,518,389	)
Future development costs		(910,432,297	)
Future net cash flow		9,309,651,933
10% annual discount for esimated timing of cash flows		(4,875,918,467	)
Standardized measure of discounted future net cash flows		4,433,733,466

Future cash inflows, production and development costs were computed using the same assumptions for prices and costs used to estimate the Company’s proved oil and gas reserves at December 31, 2021.

The following table summarizes the changes in the standardized measure of discounted future net cash flows for the year ended December 31, 2021:

Beginning balance	$	946,974,194
Net change in price and production costs		2,941,733,050
Net change in future development		125,920,584
Oil and gas sales		(725,832,113	)
Extensions		536,703,238
Acquisitions of reserves		94,683,959
Revisions of previous estimates		403,477,499
Net changes in taxes and other		15,375,636
Accretion of discount		94,697,419
Ending balance		4,433,733,466

For 2021, reserves were computed using average first-day-of-the-month closing prices for the prior twelve months of $66.55 per Bbl for West Texas Intermediate and $3.598/MMBtu for NYMEX. The Company’s future realized prices were assumed to be $56.81 per Bbl of oil, $2.22 per Mcf of gas, and $39.77 per Bbl of NGLs. NGL pricing was based on the Company’s historical NGL composition by component applied to historical WTI pricing.

THQ APPALACHIA I, LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

(14)

Subsequent Events

In preparing the consolidated financial statements, management has evaluated all subsequent events and transactions for potential recognition or disclosure through September 16, 2022, the date the consolidated financial statements were available for issuance. On September 6, 2022, the Company entered into a purchase agreement with EQT Corporation to sell the Company’s upstream assets along with the gathering and processing assets of affiliate company THQ-XCL Holdings I, LLC for total consideration of $2.6 billion of cash and 55 million shares of common stock of EQT Corporation (EQT). The Company will be selling 100% of its membership interests in THQ Appalachia I Midco, LLC (“THQA Midco”) along with the 100% membership interests of the subsidiaries of THQA Midco. This transaction is expected to close in the fourth quarter of 2022 with an effective date of July 1, 2022. No other items requiring disclosure were identified.

Exhibit 99.2

THQ APPALACHIA I, LLC AND SUBSIDIARIES

Condensed Consolidated Balance Sheet

June 30, 2022

(Unaudited)

Assets
Current assets:
Cash and cash equivalents	$	22,519,920
Accounts receivable – oil and gas sales		323,510,038
Affiliate receivable		3,810,094
Fair market value of derivatives		24,784,447
Prepaid expenses		2,242,535
Gas imbalances		2,841,990
Total current assets		379,709,024
Property and equipment:
Oil and natural gas properties, at cost, using the successful efforts method, net		1,650,372,107
Gathering facilities, net		16,774,394
Other property and equipment, net		572,750
Total property and equipment, net		1,667,719,251
Other noncurrent assets:
Restricted cash		13,751,982
Long-term deposits		87,558
Fair market value of derivatives		43,323,262
Total other noncurrent assets		57,162,802
Total assets	$	2,104,591,077
Liabilities and Members’ Equity
Current liabilities:
Accounts payable and accrued expenses	$	80,510,831
Affiliate payables		104,190,930
Litigation reserve		400,000
Revenues payable		899,439
Fair market value of derivatives		402,136,631
Gas imbalances		2,006,755
Total current liabilities		590,144,586
Revolving credit facility		598,253,337
Fair market value of derivatives		111,305,214
Asset retirement obligations		7,675,505
Total liabilities		1,307,378,642
Commitments and contingencies (notes 6 and 7)
Members’ equity:
Members’ equity		592,925,823
Retained earnings		204,286,612
Total members’ equity		797,212,435
Total liabilities and members’ equity	$	2,104,591,077

See accompanying notes to condensed consolidated financial statements.

THQ APPALACHIA I, LLC AND SUBSIDIARIES

Condensed Consolidated Statements of Income

June 30, 2022

(Unaudited)

	Three months ended			Six months ended
	June 30, 2022			June 30, 2022
Revenues:
Oil sales	$	54,497,676			106,362,377
Natural gas sales		338,858,622			532,891,334
Natural gas liquids sales		98,317,178			206,481,741
Net loss on derivative instruments		(90,279,457	)		(528,493,047	)
Other revenue (note 8)		(550,151	)		(514,687	)
Total revenues		400,843,868			316,727,718
Operating expenses:
Lease operating expenses		12,274,334			19,573,270
Production taxes		27,716,414			46,413,561
Gathering, processing and transportation		47,209,845			92,992,038
Exploration expense		4,296,502			4,490,140
Depreciation, depletion and amortization		62,214,003			108,326,628
General and administrative		4,319,593			8,128,854
(Gain) loss on sale of other property and equipment		(63,874	)		19,122
Total operating expenses		157,966,817			279,943,613
Income from operations		242,877,051			36,784,105
Other income (expenses):
Interest expense		(6,546,842	)		(12,090,986	)
Interest income		32,190			48,589
Total other expense		(6,514,652	)		(12,042,397	)
Net income	$	236,362,399			24,741,708

See accompanying notes to condensed consolidated financial statements.

THQ APPALACHIA I, LLC AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Members’ Equity

(Unaudited)

						Total
	Members’		Retained			members’
	equity		earnings			equity
Three Months Ended June 30, 2022
Balance, March 31, 2022		592,925,823		(32,075,787	)		560,850,036
Net income		—		236,362,399			236,362,399
Balance, June 30, 2022	$	592,925,823		204,286,612			797,212,435

Six Months Ended June 30, 2022
Balance, December 31, 2021		592,925,823		179,544,904			772,470,727
Net income		—		24,741,708			24,741,708
Balance, June 30, 2022	$	592,925,823		204,286,612			797,212,435

See accompanying notes to condensed consolidated financial statements.

THQ APPALACHIA I, LLC AND SUBSIDIARIES

Condensed Consolidated Statement of Cash Flows

Six Months Ended June 30, 2022

(Unaudited)

Cash flows from operating activities:
Net income	$	24,741,708
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization		108,326,628
Amortization of deferred financing costs		679,106
Exploration expense		4,490,140
Net loss on derivative instruments		528,493,047
Net cash received from derivative counterparties		(350,020,869	)
Loss on sale of other property and equipment		19,122
Change in operating assets and liabilities:
Accounts receivable		(110,610,396	)
Accounts receivable – affiliate		109,502
Prepaid expenses		(1,582,013	)
Accounts payable and accrued expenses		14,665,472
Affiliate payables		(27,313,934	)
Revenues payable		(275,027	)
Increase in gas imbalance		1,882,152
Net cash provided by operating activities		193,604,638
Cash flows from investing activities:
Net cash paid for acquisition of oil and natural gas properties		(18,618,385	)
Additions to oil and natural gas properties		(222,698,812	)
Proceeds from sale of other property and equipment		63,874
Net cash used in investing activities		(241,253,323	)
Cash flows from financing activities:
Proceeds from revolving credit facility		50,000,000
Deferred financing costs		(83,951	)
Net cash provided by financing activities		49,916,049
Net increase in cash, cash equivalents, and restricted cash		2,267,364
Cash, cash equivalents, and restricted cash, beginning of period		34,004,538
Cash, cash equivalents, and restricted cash, end of period	$	36,271,902
Supplemental disclosure of cash flow information:
Cash paid for interest	$	11,212,592
Noncash investing activities:
Noncash additions to oil and natural gas properties	$	56,194,027

See accompanying notes to condensed consolidated financial statements.

THQ APPALACHIA I, LLC AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2022

(Unaudited)

(1)

Organization and Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of THQ Appalachia I, LLC and its wholly owned subsidiaries THQ Appalachia I Midco, LLC, TH Exploration, LLC, TH Exploration II, LLC, TH Exploration III, LLC, TH Exploration IV, LLC, CLR Exploration, LLC, and THQ Marketing, LLC. CLR Exploration was dissolved on May 17, 2022. During interim periods, the Company follows the same accounting policies disclosed in its audited Annual Financial Statements.

The accompanying unaudited condensed consolidated financial statements have been prepared by the Company's management in accordance with generally accepted accounting principles in the United States (GAAP) for interim financial information. Accordingly, these financial statements do not include all of the information required by GAAP for complete financial statements. Therefore, these condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes therein for the year ended December 31, 2021. The unaudited condensed consolidated financial statements included herein contain all adjustments which are, in the opinion of management, necessary to present fairly the Company's financial position as of June 30, 2022 and its condensed consolidated statements of income, condensed consolidated statements of changes in member’s equity, and condensed consolidated statements of cash flows for the six months ended June 30, 2022. The condensed consolidated statements of income for the six months ended June 30, 2022 are not necessarily indicative of the results to be expected for future periods.

(2)

Relationship with Affiliate

The Company has an ongoing business relationship with an affiliate, Tug Hill Operating, LLC (THO). THO is responsible for acquisitions, drilling and operation of wells owned by the Company. As it incurs costs on behalf of the Company for these operations, THO bills the Company through its joint interest billing (JIB) process; and the Company reimburses THO for these costs at least monthly. THO is also responsible for the administration of the Company’s business. In exchange for these services, the Company pays a quarterly fee that includes (a) THO employees’ time and related expenses charged to the Company for the operation of its oil and natural gas properties, (b) an allocated amount of THO overhead expense calculated based on the number of hours THO employees spend working on Company projects, and (c) an additional percentage markup of the overall total of (a) and (b) to cover benefits and other employee-related costs and any unforeseen or difficult to allocate costs. The Company’s board approves the operating budgets. For the six months ended June 30, 2022, THO billed the Company $313.0 million through the JIB process. The amount due to THO for these services, which is included in the Company’s affiliate payables balance was $89.0 million as of June 30, 2022. Allocations consist of $18.8 million relating to acquisition of oil and natural gas properties, $13.3 million of lease operating expenses, $4.8 million in salaries and bonus for the operation of its oil and natural gas properties, $0.4 million for overhead expenses, $5.5 million of direct general and administrative expenses, and $270.2 million and of capital expenditures for the six months ended June 30, 2022.

THO collects certain revenues from customers on behalf of the Company. The amount due from THO, which is included in the Company’s oil and gas accounts receivable balance was $157.6 million as of June 30, 2022.

THQ APPALACHIA I, LLC AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2022

(Unaudited)

The Company incurred $20.7 million and $41.9 million in gathering, processing and transportation for the quarter and six months ended June 30, 2022, respectively, payable to an affiliate, THQ-XCL Holdings I, LLC (XCL), a Quantum and R2K controlled entity.

For the quarter ended June 30, 2022, the Company paid $1.1 million and $13.3 million in lease bonuses income and royalties, respectively, to an affiliate, Stone Hill Minerals Holdings I, LLC (SHMH), a Quantum and R2K controlled entity. For the six months ended June 30, 2022, the Company paid $1.7 million and $25.3 million in lease bonuses income and royalties, respectively, to SHMH.

(3)

Property and Equipment

(a)

Oil and Natural Gas Properties

Since inception, the Company has been involved in acquiring and leasing oil and natural gas properties in the southwest Appalachian Basin in the Northeastern United States.

Oil and natural gas properties consist of the following at June 30, 2022:

Proved properties	$	1,905,830,973
Accumulated depreciation, depletion and amortization		(495,737,161	)
Net		1,410,093,812
Unproved properties		244,768,434
Exploration and impairment		(4,490,140	)
Net		240,278,294
Total oil and natural gas properties, at cost, using the successful efforts method, net	$	1,650,372,106

Depreciation, depletion, and amortization expense for proved oil and natural gas properties was $61.7 million and $107.6 million for the quarter and six months ended June 30, 2022, respectively. Exploration and abandonment write off was $4.3 million and $4.5 million for the quarter and six months ended June 30, 2022, respectively. The Company had no significant costs which had been deferred for longer than one year as of June 30, 2022.

THQ APPALACHIA I, LLC AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2022

(Unaudited)

(b)

Gathering Facilities and Other Property and Equipment

Gathering facilities and other property and equipment consists of the following at June 30, 2022:

Gathering facilities	$	17,428,357
Other property and equipment		2,146,045
Total capitalized costs		19,574,402
Accumulated depreciation		(2,227,259	)
Total net capitalized costs	$	17,347,143

Depreciation expense for gathering facilities and other property and equipment was $0.3 million and $0.5 million for the quarter and six months ended June 30, 2022, respectively.

(4)

Long-Term Debt

Senior Secured Revolving Credit Facility

The Company has a senior secured revolving bank credit facility (the Credit Facility) with a group of large, commercial lenders. Borrowings under the Credit Facility are subject to borrowing base limitations based on the collateral value of the Company’s proved properties and commodity hedge positions and are subject to regular semiannual redeterminations or more frequently if requested by the Company. The borrowing base was redetermined in May 2022 to be $850 million. The next redetermination of the borrowing base is scheduled to occur in October 2022. As of June 30, 2022, the Company had an outstanding balance under the Credit Facility of $600 million, with a weighted average interest rate of approximately 4.81%. The amounts reflected in the Company’s June 30, 2022 condensed consolidated balance sheet is shown net of the debt issuance costs of $1.7 million. The maturity date of the Credit Facility is October 7, 2023.

Commitment fees on the unused portion of the Credit Facility are due quarterly at a rate of 0.50% of the unused portion, based on utilization.

THQ APPALACHIA I, LLC AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2022

(Unaudited)

(5)

Derivative Instruments

During the six months ended June 30, 2022, the Company was party to various natural gas fixed price swap contracts and costless collars. When actual commodity prices exceed the fixed price provided by the swap contracts, the Company pays the excess to the counterparty. When actual commodity prices are below the contractually provided fixed price, the Company receives the difference from the counterparty. When actual commodity prices fall within the band provided by the costless collars, the Company receives the actual prices from the counterparty. When actual commodity prices fall outside the band provided by the costless collars, the Company receives the price provided by the collar from the counterparty and pays the actual price to the counterparty.

THQ APPALACHIA I, LLC AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2022

(Unaudited)

As of June 30, 2022, the Company’s fixed price natural gas and oil swap positions were as follows:

	2022			2023			2024
NYMEX Henry Hub Swaps:
Volume (MMbtu/day)		358,533			85,000			—
Average price ($/MMBtu)	$	2.41			3.23			—
NYMEX Henry Hub Long Puts:
Volume (MMbtu/day)		120,000			195,000			100,000
Average price ($/MMBtu)	$	2.69			2.82			2.80
NYMEX Henry Hub Short Calls:
Volume (MMbtu/day)		120,000			195,000			100,000
Average price ($/MMBtu)	$	4.35			3.80			3.88
Columbia Gas (TCO) Basis Swaps:
Volume (MMbtu/day)		42,500			—			—
Average price ($/MMBtu)	$	(0.62	)		—			—
Dominion South Basis Swaps:
Volume (MMbtu/day)		200,000			190,000			100,000
Average price ($/MMBtu)	$	(0.74	)		(0.75	)		(0.72	)
WTI Swaps:
Volume (Bbls/day)		4,500			1,750			900
Average price ($/Bbl)	$	53.11			58.51			63.25
Mt. Blv. Propane Swaps:
Volume (Bbls/day)		4,500			3,000			—
Average price ($/gallon)	$	0.62			0.97			—

The following is a summary of derivative fair value gains which are recorded in the condensed consolidated statements of operations included in net loss on derivative instruments:

	Three months ended			Six months ended
	June 30, 2022			June 30, 2022
Cash settlement of derivative contracts	$	(237,124,719	)		(350,020,869	)
Noncash change in derivative fair value		146,845,262			(178,472,178	)
Net loss on derivative instruments	$	(90,279,457	)		(528,493,047	)

THQ APPALACHIA I, LLC AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2022

(Unaudited)

The following is a summary of the fair values of the Company’s derivative instruments and where such values are recorded in the condensed consolidated balance sheets as of June 30, 2022:

	Balance sheet
	location	Fair value
Commodity derivatives:
Commodity contracts	Current assets	$	24,784,447
Commodity contracts	Long-term assets		43,323,262
Total derivative assets			68,107,709
Commodity contracts	Current liabilities		402,136,631
Commodity contracts	Long-term liabilities		111,305,214
Total derivative liabilities			513,441,845
Net derivatives		$	(445,334,136	)

THQ APPALACHIA I, LLC AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2022

(Unaudited)

(6)

Commitments

The following is a schedule of future minimum payments for firm transportation, drilling rig and processing, gathering and compression agreements as of June 30, 2022.

			Processing,
			gathering		Drilling
	Firm		and		rigs and
	transportation		compression		completion
	(a)		(b)		(c)		Total
Remaining 2022	$	18,400,000		2,095,593		35,968,222		56,463,815
2023		36,500,000		—		5,106,350		41,606,350
2024		36,600,000		—		—		36,600,000
2025		36,500,000		—		—		36,500,000
2026		36,500,000		—		—		36,500,000
Thereafter		258,800,000		—		—		258,800,000
Total	$	423,300,000		2,095,593		41,074,572		466,470,165

(a)

Firm Transportation

The Company has entered into firm transportation agreements with a pipeline in order to facilitate the delivery of its production to market. This contract commits the Company to transport minimum daily natural gas volumes at negotiated rates, or pay for any deficiencies at specified reservation fee rates once the pipeline goes into service. The amounts in this table represent the Company’s minimum daily volumes at the reservation fee rate. The values in the table represent the gross amounts that the Company is committed to pay; however, the Company will record in the condensed consolidated financial statements its proportionate share of costs based on its net revenue interest.

(b)

Processing, Gathering, and Compression Service Commitments

(c)

Drilling Rig and Completion Service Commitments

The Company has obligations under agreements with service providers to procure drilling and completion services. The values in the table represent the gross amounts that the Company is committed to pay; however, the Company will record in the condensed consolidated financial statements its proportionate share of costs based on its working interest.

THQ APPALACHIA I, LLC AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2022

(Unaudited)

(d)

Office and Equipment Leases

The Company leases various office space and equipment, as well as field equipment, under operating lease arrangements. Rental expense under operating leases was immaterial for 2022.

(7)

Contingencies

Litigation

As part of the High Road acquisition, the purchase price included a $0.7 million litigation reserve for litigation involving alleged non-payment of lease bonuses and disputes over ownership rights. The Company has successfully defended and settled a portion of the claims for $0.3 million. The Company has a remaining ligation reserve of $0.4 million at June 30, 2022 for these claims.

Environmental Remediation

(8)

Other Revenue

The Company experienced gas imbalance losses of $0.8 million and $1.9 million for the quarter and six months ended June 30, 2022, respectively, which are reflected in other revenues in the Company’s condensed consolidated statements of income.

The Company also received fees from third parties for road and other asset use agreements during 2022.

(9)

Membership Interests

There are two classes of membership interest – capital interests and management incentive interests. Capital interests held by Quantum, R2K and members of management have full voting rights and rights to share in the distributions of the Company. As described more fully in note 10, management incentive interests can be issued under the Incentive Pool Plan and are nonvoting with no rights to share in distributions until the capital contributed interests have earned the full base return.

THQ APPALACHIA I, LLC AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2022

(Unaudited)

(10)

Management Incentive Unit Plan

(11)

Subsequent Events

In preparing the condensed consolidated financial statements, management has evaluated all subsequent events and transactions for potential recognition or disclosure through September 16, 2022, the date the condensed consolidated financial statements were available for issuance. On September 6, 2022, the Company entered into a purchase agreement with EQT Corporation to sell the Company’s upstream assets along with the gathering and processing assets of affiliate company THQ-XCL Holdings I, LLC for total consideration of $2.6 billion of cash and 55 million shares of common stock of EQT Corporation (EQT). The Company will be selling 100% of its membership interests in THQ Appalachia I Midco, LLC (“THQA Midco”) along with the 100% membership interests of the subsidiaries of THQA Midco. This transaction is expected to close in the fourth quarter of 2022 with an effective date of July 1, 2022. No other items requiring disclosure were identified.

Exhibit 99.3

Independent Auditors’ Report

The Members
THQ-XCL Holdings I, LLC:

Opinion

We have audited the consolidated financial statements of THQ-XCL Holdings I, LLC and its subsidiaries (the Company), which comprise the consolidated balance sheet as of December 31, 2021, and the related consolidated statements of income, changes in members’ equity, and cash flows for the year then ended, and the related notes to the consolidated financial statements.

Basis for Opinion

Responsibilities of Management for the Consolidated Financial Statements

Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

In performing an audit in accordance with GAAS, we:

●

Exercise professional judgment and maintain professional skepticism throughout the audit.

●

/s/ KPMG LLP

Dallas, Texas
September 16, 2022

THQ-XCL HOLDINgS I, LLC and Subsidiaries

Consolidated Balance Sheet

December 31, 2021

Assets
Current assets:
Cash and cash equivalents	$	15,540,976
Affiliate receivables		24,389,628
Accounts receivable		7,256,719
Prepaid expenditures		1,049,231
Total current assets		48,236,554
Property and equipment:
Land and rights-of-way		39,020,896
Gathering and water pipelines and facilities		434,005,281
Processing plant and facilities		148,312,418
Other property and equipment		1,101,372
Accumulated depreciation, depletion, and amortization		(62,386,464	)
Property and equipment, net		560,053,503
Total assets	$	608,290,057
Liabilities and Members’ Equity
Current liabilities:
Accounts payable and accrued expenses	$	12,167,821
Affiliate payables		8,578,976
Total current liabilities		20,746,797
Revolving credit facility, net of deferred financing costs		179,629,688
Total liabilities		200,376,485
Commitments and contingencies (notes 5 and 6)
Members’ equity:
Members’ equity (note 8)		347,520,988
Retained earnings		60,392,584
Total members’ equity		407,913,572
Total liabilities and members’ equity	$	608,290,057

See accompanying notes to consolidated financial statements.

THQ-XCL HOLDINGS I, LLC AND SUBSIDIARIES

Consolidated Statement of Income

Year Ended December 31, 2021

Revenues:
Midstream revenue	$	2,469,093
Midstream revenue – affiliate		80,183,024
Water transportation revenue – affiliate		6,206,897
Processing revenue		27,945,553
Total revenues		116,804,567
Operating expenses:
Midstream operating expenses		15,398,060
Processing operating expenses		3,747,784
General and administrative		9,387,273
Depreciation, depletion, and amortization		30,430,740
Loss on sale of assets		307,179
Total operating expenses		59,271,036
Income from operations		57,533,531
Other expenses:
Interest expense		(6,734,774	)
Total other expense		(6,734,774	)
Net income	$	50,798,757

See accompanying notes to consolidated financial statements.

THQ-XCL HOLDINGS I, LLC AND SUBSIDIARIES

Consolidated Statement of Changes in Members’ Equity

Year Ended December 31, 2021

						Total
	Members’			Retained		members’
	equity			earnings		equity
Balance, December 31, 2020	$	348,521,160			9,593,827		358,114,987
Transfer of assets to affiliate (note 7)		(1,000,172	)		—		(1,000,172	)
Net income		—			50,798,757		50,798,757
Balance, December 31, 2021	$	347,520,988			60,392,584		407,913,572

See accompanying notes to consolidated financial statements.

THQ-XCL HOLDINGS I, LLC AND SUBSIDIARIES

Consolidated Statement of Cash Flows

Year Ended December 31, 2021

Cash flows from operating activities:
Net income	$	50,798,757
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization		30,430,740
Amortization of debt issuance cost		777,385
Loss on sale of assets		307,179
Changes in operating assets and liabilities:
Affiliate receivables		(2,294,736	)
Accounts receivable		674,165
Prepaid expenditures		(50,875	)
Accounts payable and accrued expenses		2,643,175
Affiliate payables		2,156,578
Net cash provided by operating activities		85,442,368
Cash flows from investing activities:
Acquisition of land and rights of way		(5,332,701	)
Capital expenditures		(45,643,480	)
Acquisition of High Road Midstream, LLC		(5,304,580	)
Sale of assets		135,000
Net cash used in investing activities		(56,145,761	)
Cash flows from financing activity:
Payments on revolving credit facility		(18,000,000	)
Deferred financing costs		(2,041,919	)
Net cash used in financing activity		(20,041,919	)
Net increase in cash and cash equivalents		9,254,688
Cash and cash equivalents, beginning of period		6,286,288
Cash and cash equivalents, end of period	$	15,540,976
Supplemental disclosure of cash flow information:
Cash paid for interest	$	5,992,323
Noncash investing activities:
Noncash additions to property	$	1,536,523
Noncash financing activities:
Transfer of assets to affiliates (note 7)	$	(1,000,172	)

See accompanying notes to consolidated financial statements.

THQ-XCL HOLDINGS I, LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

(1)

Organization and Description of Business

THQ-XcL Holdings I, LLC (the Company) is a midstream energy company engaged in the acquisition, development and operation of oil, natural gas, natural gas liquids, and water infrastructure and processing assets in the Appalachia Basin, namely the Marcellus and Point Pleasant shale trends in the Northeastern United States. Its executive offices are located in Fort Worth, Texas.

The operations of the Company are governed by the provisions of a Limited Liability Company Agreement (the Agreement) dated December 20, 2017, as executed by and among its members. The Company’s majority member is Q-XcL Holdings I (VI) Investment Partners, LLC (Quantum), with Radler 2000, LP (R2K) and certain members of management comprising the remaining capital members. The Agreement includes specific provisions with respect to the maintenance of the capital accounts of each of the Company’s members (see note 8).

(2)

Summary of Significant Accounting Policies

(a)

Basis of Accounting and Presentation

The accompanying consolidated financial statements include the accounts of THQ-XcL Holdings I, LLC and its wholly owned subsidiaries XcL Holdings Corporation, XcL Midstream, LLC, XcL Midstream Operating, LLC, XcL Processing, LLC, and XcL Processing Operating, LLC. All significant intercompany balances and transactions have been eliminated in the consolidation.

(b)

Use of Estimates

The preparation of the consolidated financial statements and notes in conformity with U.S. GAAP requires that management formulate estimates and assumptions that affect revenues, expenses, assets, liabilities and the disclosure of contingent assets and liabilities. Items subject to estimates and assumptions include the useful lives of property and equipment and valuation of accrued liabilities, among others. Although management believes these estimates are reasonable, actual results could differ from these estimates.

(c)

Cash and Cash Equivalents

The Company considers all cash and highly liquid investments with original maturities of three months or less when purchased to be cash equivalents.

(d)

Property and Equipment

Property and equipment primarily consists of gathering pipelines, processing plant, fresh water delivery pipelines, and facilities stated at historical cost less accumulated depreciation. We capitalize construction-related direct labor and material costs. Maintenance and repair costs are expensed as incurred.

THQ-XCL HOLDINGS I, LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

(e)

Provision for Depreciation

Depreciation is computed using the straight-line method over the estimated useful lives and considering the estimated salvage values of assets. Uncertainties that may impact these estimates of useful lives include, among others, changes in laws and regulations relating to environmental matters, including air and water quality, restoration and abandonment requirements, economic conditions, and supply and demand for our services in the areas in which we operate. When assets are placed into service, management makes estimates with respect to useful lives and salvage values that management believes are reasonable. However, subsequent events could cause a change in estimates, thereby impacting future depreciation amounts.

(f)

Impairment of Long-Lived Assets

We evaluate our long-lived assets for impairment when events or changes in circumstances indicate that the related carrying values of the assets may not be recoverable. Generally, the basis for making such assessments are undiscounted future cash flow projections for the asset group being assessed. If the carrying values of the assets are deemed not recoverable, the carrying values are reduced to the estimated fair values, which are based on discounted future cash flows using assumptions as to revenues, costs and discount rates typical of third party market participants, which is a Level 3 fair value measurement.

(g)

Asset Retirement Obligations

Under Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 410, Asset Retirement and Environmental Obligations, an asset retirement obligation is recorded as a liability at its estimated present value at the asset’s inception, with an offsetting increase to producing properties in the accompanying balance sheets which is allocated to expense over the useful life of the asset. Periodic accretion of the discount on asset retirement obligations is recorded as an expense in depreciation, depletion, and amortization in the accompanying consolidated statement of income.

Our gathering pipelines, processing plant, compressor stations and fresh water delivery pipelines and facilities have an indeterminate life, if properly maintained. Accordingly, we are not able to make a reasonable estimate of when future dismantlement and removal dates of our pipelines, processing plant, compressor stations and facilities will occur. We are under no legal obligations, neither contractually nor under the doctrine of promissory estoppel, to restore or dismantle our gathering pipelines, processing plant, compressor stations, water delivery pipelines and water treatment facility upon abandonment. It has been determined by our operational management team that abandoning all other ancillary equipment, outside of the assets stated above, would require minimal costs. For the reasons stated above, we have not recorded asset retirement obligations on the gathering pipelines, processing plant, compressor stations, water delivery pipelines and water treatment facilities at December 31, 2021.

(h)

Revenue Recognition

THQ-XCL HOLDINGS I, LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

We provide gathering, processing, compression, and water handling and treatment services under fee-based contracts primarily based on throughput. Under these arrangements, we receive fees for gathering and processing oil and gas products, compression services, and water handling and treatment services. The revenue we earn from these arrangements is directly related to (1) in the case of natural gas gathering, processing and compression, the volumes of metered natural gas that we gather, process, compress and deliver to natural gas compression sites or other transmission delivery points, (2) in the case of oil gathering, the volumes of metered oil that we gather and deliver to other transmission delivery points, (3) in the case of fresh water services, the quantities of fresh water delivered to our customers for use in their well completion operations, or (4) in the case of flowback and produced water, the quantities of flowback and produced water treated for our customers.

For midstream service contracts in which there is no commodity purchase, control of the commodity never passes to us; and we simply earn a fee for services. We consider these contracts to contain performance obligations for our services. Accordingly, we consider the satisfaction of these performance obligations as revenue-generating, and we recognize the fees received for satisfying these performance obligations as midstream service revenue over time as we satisfy our performance obligations.

Effective October 1, 2021, the Company no longer provides water handling and treatment services. The Company sold the water delivery assets to TH Exploration II, LLC (“TH Exploration II”) in exchange for the gas and condensate gathering assets owned by TH Exploration II (see note 7).

(i)

Risks and Uncertainties

The Company’s revenues are derived principally from providing gathering, processing, compression, and water handling services to operators in the oil and natural gas industry. The concentration of credit risk in a single industry affects the Company’s overall exposure to credit risk because purchasers may be similarly affected by changes in economic and other conditions. Additionally, as the Company operates in the oil and gas industry, this concentration may impact the Company’s business risk, either positively or negatively, in that commodity prices, customers and suppliers may be similarly affected by changes in economic, political or other conditions related to the industry.

The Company’s main customer is its affiliate, THQA Appalachia I, LLC (“THQA”). THQA comprised approximately 74% of the Company’s revenue in 2021.

The Company maintains deposits primarily in one financial institution, which may at times exceed amounts covered by insurance provided by the U.S. Federal Deposit Insurance Corporation (FDIC). The Company has not experienced any losses related to amounts in excess of FDIC limits.

THQ-XCL HOLDINgS I, LLC and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2021

(j)

Fair Value Measurement

Level 1:

Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access.

Level 2:

Inputs to the valuation methodology include:

Quoted prices for similar assets or liabilities in active markets;

Quoted prices for identical or similar assets or liabilities in inactive markets;

Inputs other than quoted prices that are observable for the asset or liability;

Inputs that are derived principally from or corroborated by observable market data by correlation or other means.

If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.

Level 3:

Inputs to the valuation methodology are unobservable and significant to the fair value measurements.

(k)

Fair Value on a Non-Recurring Basis

(l)

Relationship with Affiliate

The Company has an ongoing business relationship with an affiliate, Tug Hill Operating, LLC (THO). THO is responsible for acquisitions, construction and operation of gathering systems and related facilities owned by the Company. As it incurs costs on behalf of the Company for these operations, THO bills the Company through its joint interest billing (JIB) process; and the Company reimburses THO for these costs at least monthly. THO is also responsible for the administration of the Company’s business. In exchange for these services, the Company pays a quarterly fee that includes (a) THO employees’ time and related expenses charged to the Company for the operation of its oil and natural gas properties, (b) an allocated amount of THO overhead expense calculated based on the number of hours THO employees spend working on Company projects, and (c) an additional percentage markup of the overall total of (a) and (b) to cover benefits and other employee-related costs and any unforeseen or difficult to allocate costs. The Company’s board approves the operating budgets. For year ended December 31, 2021, THO billed the Company $16.1 million through the JIB process. The amount due to THO for these services, which is included in the Company’s affiliate payable balance was $6.5 million as of December 31, 2021. The remaining affiliate payable balance of $2.1 million as of December 31, 2021 is for revenues received by the Company that were due to THQA. Allocations consist of $0.1 million relating to acquisition of surface use agreements and rights-of-way, $2.4 million of construction expenditures and operating expenses, $11.1 million in salaries and bonus for the operation of its business, $0.8 million for overhead expenses, and $1.7 million of direct general and administrative expenses for the period ended December 31, 2021.

THQ-XCL HOLDINgS I, LLC and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2021

The Company’s most significant customer is THQA. The Company provides water delivery, condensate gathering and stabilization, and gas gathering and processing, and related services to THQA and receives fees from THQA based on the volumes transported by the Company. On December 10, 2021, the Company sold the water delivery assets to TH Exploration II, a subsidiary of THQA, in exchange for the gas and condensate gathering assets owned by TH Exploration II (see note 7).

(m)

Income Taxes

(n)

Recent Accounting Pronouncements

THQ-XCL HOLDINgS I, LLC and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2021

(3)

Property and Equipment

The Company began constructing gathering pipelines, fresh water delivery pipelines, and facilities in 2017 and a natural gas processing plant in 2019. A portion of the gathering pipelines, fresh water delivery pipelines, and facilities were placed into service in 2021, while some of the gathering pipelines and facilities projects are still in the construction phase. In 2021, the fresh water delivery pipelines and water infrastructure assets were sold in exchange for the gas and condensate gathering assets owned by TH Exploration II (see note 7). The processing plant was placed into service in the third quarter of 2020. Property and equipment consists of the following at December 31, 2021:

Gathering and water pipelines and facilities	$	434,005,281
Land and rights-of-way		39,020,896
Processing plant and facilities		148,312,418
Other property and equipment		1,101,372
Total capitalized costs		622,439,967
Accumulated depreciation		(62,386,464	)
Total net capitalized costs	$	560,053,503

Depreciation expense was recorded on certain pipelines, facilities, and the processing plant that were placed into service, using a 20-year life. For those pipelines and facilities that were still in the construction phase, no depreciation was recorded in 2021.

Effective September 1, 2021, the Company decided to cease construction on a second processing plant. This resulted in a $0.9 million impairment in 2021 which was recorded to depreciation.

On July 9, 2021, the Company closed on the purchase of High Road Midstream, LLC for $5.2 million cash consideration. The assets were purchased by THQA, an entity under common control, on behalf of the Company for $5.1 million. The Company reimbursed THQA $5.1 million in August 2021 and incurred an additional $0.1 million in transaction costs. The assets include all equipment and associated agreements necessary to operate the midstream system including, but not limited to: all gas and water pipelines, taps, interconnect agreements, gas gathering agreements, right-of-way, easements, surface sites, withdrawal sites and licenses.

THQ-XCL HOLDINgS I, LLC and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2021

(4)

Long-Term Debt

Senior Secured Revolving Credit Facility

The Company has a $250 million senior secured revolving bank credit facility (the Credit Facility) with a group of large, commercial lenders. Borrowings under the Credit Facility are limited based on meeting quarterly interest and leverage coverage ratios. As of December 31, 2021, the amount outstanding was $181.7 million, with a weighted average interest rate of approximately 3.10%. The amount reflected in the Company’s December 31, 2021 balance sheet is shown net of the debt issuance costs of $2.1 million. In May 2021, the Company increased the Credit Facility to $250 million and extended the maturity date to May 2, 2025.

The Credit Facility is secured by liens on substantially all of the Company’s properties and guarantees from the Company’s restricted subsidiaries, as applicable. The Credit Facility contains certain other covenants, including restrictions on indebtedness and dividends. Interest is payable at a variable rate based on LIBOR or the prime rate, determined by the Company’s election at the time of borrowing. The Company was in compliance with all of the financial covenants under the Credit Facility as of December 31, 2021.

(5)

Commitments

The following is a schedule of future minimum payments for fractionation services and purchase orders for cryogenic processing facilities, pipelines, and interconnections as of December 31, 2021.

			Processing		Pipelines
	Fractionation		Facilities		and Meters
	(a)		(b)		(c)		Total
Year ending December 31:
2022	$	5,748,750		216,736		1,930,555		7,896,041
2023		5,748,750		—		—		5,748,750
2024		5,764,500		—		—		5,764,500
2025		5,748,750		—		—		5,748,750
2026		5,748,750		—		—		5,748,750
Thereafter		3,827,250		—		—		3,827,250
Totals	$	32,586,750		216,736		1,930,555		34,734,041

(a)

Fractionation

The Company has entered into a firm fractionation agreement in order to facilitate the fractionation of natural gas liquids into purity products. This contract commits the Company to transport minimum daily natural gas liquids volumes at negotiated rates, or pay for any deficiencies at a specified fee beginning in the third quarter of 2021. Actual payments under this agreement will differ from the amounts shown in the table above as the Company expects to deliver volumes in excess of the minimum commitment. This commitment has varying terms, renewal rights and an escalation clause. The fractionation fee is escalated annually and is adjusted up or down in proportion to the lesser of 55% of the annual percentage change in the Oil PPI ended June of the year preceding the date of adjustment or 2%; provided, however, that in no event shall the adjustment fee ever be less than the initial fee.

THQ-XCL HOLDINgS I, LLC and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2021

(b)

Processing Facilities

The Company is committed to regular maintenance services and repairs of the cryogenic processing facility.

(c)

Pipelines and Meters

The Company is committed to purchases of steel pipe, metering, and related materials during 2022.

(d)

Office and Equipment Leases

The Company leases various office space and equipment, as well as field equipment, under operating lease arrangements. Rental expense under operating leases was immaterial for 2021.

(6)

Contingencies

The Company is subject to certain claims and litigation arising in the normal course of business. In the opinion of management, the outcome of such matters will not have a material adverse effect on the results of operations or financial position of the Company.

(7)

Related Party Transaction

On December 10, 2021, the Company’s board approved the purchase of the gas and condensate gathering assets, including the corresponding rights-of-way (the “Legacy Gathering System”), from TH Exploration II for the sale of all water pipelines, water pipeline systems, and all associated water infrastructure, including the corresponding rights-of-way, in Marshall and Wetzel Counties, WV, Belmont and Monroe Counties, OH and Greene County, PA, (the “XcL Water System”) to TH Exploration II. This transaction was treated as an exchange of assets between entities under common control. The net book value of the XcL Water System was approximately $1.0 million in excess of the Legacy Gathering System’s carrying value; this excess amount was treated as a distribution from the Company. TH Exploration II will reimburse the Company for all costs associated with in process construction projects on the XcL Water System.

(8)

Membership Interests

There are two classes of membership interest – capital interests and management incentive interests. Capital interests held by Quantum, R2K and members of management have full voting rights and rights to share in the distributions of the Company. As described more fully in note 9, management incentive interests can be issued under the Incentive Pool Plan and are non-voting with no rights to share in distributions until the capital contributed interests have earned the full base return.

THQ-XCL HOLDINgS I, LLC and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2021

On December 10, 2021, the Company’s board approved the purchase of the Legacy Gathering System from TH Exploration II for the sale of the XcL Water System to TH Exploration II (note 7). This transaction was treated as an exchange of assets between entities under common control. The net book value of the XcL Water System was approximately $1.0 million in excess of the Legacy Gathering System’s carrying value; this excess amount was treated as a distribution from the Company.

Total equity commitments from the members is $457 million, of which $358 million was funded as of December 31, 2021, leaving $99 million in available equity should the Company need additional funding.

(9)

Management Incentive Unit Plan

Effective with the formation of the Company on December 20, 2017, the Company adopted an incentive unit plan, THQ-XcL Employee Holdings I, LLC, (the Plan) to provide profit awards to employees (management incentive units). The Company can issue up to 2,000,000 units to certain employees in consideration of services rendered and to be rendered by the holders, for the benefit of the Company in their capacities as employees. All of the incentive units will be subject to vesting over five years, forfeiture, and termination. The management incentive units have no voting rights, do not have an exercise price and are automatically forfeited except in extenuating circumstances if and when such person’s status as an employee is terminated.

(10)

Subsequent Events

In preparing the condensed consolidated financial statements, management has evaluated all subsequent events and transactions for potential recognition or disclosure through September 16, 2022, the date the condensed consolidated financial statements were available for issuance. On September 6, 2022, the Company entered into a purchase agreement with EQT Corporation to sell the Company’s gathering and processing assets along with the upstream assets of affiliate company THQ Appalachia I, LLC for total consideration of $2.6 billion of cash and 55 million shares of common stock of EQT Corporation (EQT). The Company will be selling 100% of its membership interests in THQ-XcL Holdings I Midco, LLC (“THQ-XcL Midco”) along with the 100% membership interests of the subsidiaries of THQ-XcL Midco. This transaction is expected to close in the fourth quarter of 2022 with an effective date of July 1, 2022. No other items requiring disclosure were identified.

Exhibit 99.4

THQ-XCL HOLDINgS I, LLC and Subsidiaries

Condensed Consolidated Balance Sheet

June 30, 2022

(Unaudited)

Assets
Current assets:
Cash and cash equivalents	$	16,393,401
Affiliate receivables		15,193,997
Accounts receivable		7,751,280
Prepaid expenditures		2,071,725
Total current assets		41,410,403
Property and equipment:
Land and rights-of-way		45,394,333
Gathering and water pipelines and facilities		459,102,345
Processing plant and facilities		148,428,810
Other property and equipment		1,266,780
Accumulated depreciation, depletion, and amortization		(77,262,549	)
Property and equipment, net		576,929,719
Total assets	$	618,340,122
Liabilities and Members’ Equity
Current liabilities:
Accounts payable and accrued expenses	$	22,518,577
Affiliate payables		5,297,921
Total current liabilities		27,816,498
Revolving credit facility, net of deferred financing costs		156,940,235
Total liabilities		184,756,733
Commitments and contingencies (notes 5 and 6)
Members’ equity:
Members’ equity (note 7)		344,936,063
Retained earnings		88,647,326
Total members’ equity		433,583,389
Total liabilities and members’ equity	$	618,340,122

See accompanying notes to condensed consolidated financial statements.

THQ-XCL HOLDINgS I, LLC and Subsidiaries

Condensed Consolidated Statements of Income

June 30, 2022

(Unaudited)

	Three Months Ended			Six Months Ended
	June 30, 2022			June 30, 2022
Revenues:
Midstream revenue	$	612,746			1,587,720
Midstream revenue – affiliate		22,706,752			44,536,475
Processing revenue		8,205,943			16,259,451
Total revenues		31,525,441			62,383,646
Operating expenses:
Midstream operating expenses		3,588,164			8,694,880
Processing operating expenses		1,154,182			2,088,600
General and administrative		2,631,713			5,101,739
Depreciation, depletion, and amortization		7,604,119			14,876,085
Total operating expenses		14,978,178			30,761,304
Income from operations		16,547,263			31,622,342
Other expenses:
Interest expense		(1,774,531	)		(3,367,600	)
Total other expense		(1,774,531	)		(3,367,600	)
Net income	$	14,772,732			28,254,742

See accompanying notes to condensed consolidated financial statements.

THQ-XCL HOLDINgS I, LLC and Subsidiaries

Condensed Consolidated Statements of Changes in Members’ Equity

(Unaudited)

						Total
	Members’			Retained		members’
	equity			earnings		equity
Three Months Ended June 30, 2022
Balance, March 31, 2022		344,936,063			73,874,594		418,810,657
Net income		—			14,772,732		14,772,732
Balance, June 30, 2022	$	344,936,063			88,647,326		433,583,389

Six Months Ended June 30, 2022
Balance, December 31, 2021		347,520,988			60,392,584		407,913,572
Distribution to members		(2,584,925	)		—		(2,584,925	)
Net income		—			28,254,742		28,254,742
Balance, June 30, 2022	$	344,936,063			88,647,326		433,583,389

See accompanying notes to condensed consolidated financial statements.

THQ-XCL HOLDINgS I, LLC and Subsidiaries

Condensed Consolidated Statement of Cash Flows

Six Months Ended June 30, 2022

(Unaudited)

Cash flows from operating activities:
Net income	$	28,254,742
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization		14,876,085
Amortization of debt issuance cost		310,547
Changes in operating assets and liabilities:
Affiliate receivables		9,195,630
Accounts receivable		(494,562	)
Prepaid expenditures		(1,022,493	)
Accounts payable and accrued expenses		7,242,890
Affiliate payables		(3,281,055	)
Net cash provided by operating activities		55,081,784
Cash flows from investing activities:
Acquisition of land and rights of way		(6,421,574	)
Capital expenditures		(22,222,860	)
Net cash used in investing activities		(28,644,434	)
Cash flows from financing activity:
Members’ distributions		(2,584,925	)
Payments on revolving credit facility		(23,000,000	)
Net cash used in financing activity		(25,584,925	)
Net increase in cash and cash equivalents		852,425
Cash and cash equivalents, beginning of period		15,540,976
Cash and cash equivalents, end of period	$	16,393,401
Supplemental disclosure of cash flow information:
Cash paid for interest	$	3,060,763
Noncash investing activities:
Noncash additions to property	$	4,644,390

See accompanying notes to condensed consolidated financial statements.

THQ-XCL HOLDINgS I, LLC and Subsidiaries

Notes to Condensed Consolidated Financial Statements

June 30, 2022

(Unaudited)

(1)

Organization and Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of THQ-XcL Holdings I, LLC and its wholly owned subsidiaries THQ-XcL Holdings I Midco, LLC, XcL Holdings Corporation, XcL Midstream, LLC, XcL Midstream Operating, LLC, XcL Processing, LLC, and XcL Processing Operating, LLC. XcL Holdings Corporation was dissolved on May 17, 2022. During interim periods, the Company follows the same accounting policies disclosed in its audited Annual Financial Statements.

(2)

Relationship with Affiliate

The Company has an ongoing business relationship with an affiliate, Tug Hill Operating, LLC (THO). THO is responsible for acquisitions, construction and operation of gathering systems and related facilities owned by the Company. As it incurs costs on behalf of the Company for these operations, THO bills the Company through its joint interest billing (JIB) process; and the Company reimburses THO for these costs at least monthly. THO is also responsible for the administration of the Company’s business. In exchange for these services, the Company pays a quarterly fee that includes (a) THO employees’ time and related expenses charged to the Company for the operation of its oil and natural gas properties, (b) an allocated amount of THO overhead expense calculated based on the number of hours THO employees spend working on Company projects, and (c) an additional percentage markup of the overall total of (a) and (b) to cover benefits and other employee-related costs and any unforeseen or difficult to allocate costs. The Company’s board approves the operating budgets. For six months ended June 30, 2022, THO billed the Company $8.6 million through the JIB process. The amount due to THO for these services, which are included in the Company’s affiliate payables balance was $3.3 million as of June 30, 2022. The remaining affiliate payable balance of $2.0 million as of June 30, 2022 was for revenues received by the Company that were due to THQA. Allocations consist of $1.6 million of construction expenditures and operating expenses, $4.7 million in salaries and bonus for the operation of its business, $0.3 million for overhead expenses, and $2.0 million of direct general and administrative expenses for the six months ended June 30, 2022.

THQ-XCL HOLDINgS I, LLC and Subsidiaries

Notes to Condensed Consolidated Financial Statements

June 30, 2022

(Unaudited)

(3)

Property and Equipment

Property and equipment consists of the following as of June 30, 2022:

Gathering and water pipelines and facilities	$	459,102,345
Land and rights-of-way		45,394,333
Processing plant and facilities		148,428,810
Other property and equipment		1,266,780
Total capitalized costs		654,192,268
Accumulated depreciation		(77,262,549	)
Total net capitalized costs	$	576,929,719

Depreciation expense was recorded on certain pipelines, facilities, and the processing plant that were placed into service as of June 30, 2022, using a 20-year life. For those pipelines and facilities that were still in the construction phase, no depreciation was recorded in 2022.

(4)

Long-Term Debt

Senior Secured Revolving Credit Facility

The Company has a $250 million senior secured revolving bank credit facility (the Credit Facility) with a group of large, commercial lenders with a maturity date of May 2, 2025. Borrowings under the Credit Facility are limited based on meeting quarterly interest and leverage coverage ratios. As of June 30, 2022, the amount outstanding was $158.7 million, with a weighted average interest rate of approximately 4.19%. The amount reflected in the Company’s June 30, 2022, balance sheet is shown net of the debt issuance costs of $1.8 million.

The Credit Facility is secured by liens on substantially all of the Company’s properties and guarantees from the Company’s restricted subsidiaries, as applicable. The Credit Facility contains certain other covenants, including restrictions on indebtedness and dividends. Interest is payable at a variable rate based on LIBOR or the prime rate, determined by the Company’s election at the time of borrowing. The Company was in compliance with all of the financial covenants under the Credit Facility as of June 30, 2022.

THQ-XCL HOLDINgS I, LLC and Subsidiaries

Notes to Condensed Consolidated Financial Statements

June 30, 2022

(Unaudited)

(5)

Commitments

The following is a schedule of future minimum payments for fractionation services and purchase orders for cryogenic processing facilities, pipelines, and interconnections as of June 30, 2022.

			Processing		Pipelines
	Fractionation		Facilities		and Meters
	(a)		(b)		(c)		Total
Remaining 2022	$	2,898,000		341,134		410,385		3,649,519
2023		5,748,750		—		—		5,748,750
2024		5,764,500		—		—		5,764,500
2025		5,748,750		—		—		5,748,750
2026		5,748,750		—		—		5,748,750
Thereafter		3,827,250		—		—		3,827,250
Totals	$	29,736,000		341,134		410,385		30,487,519

(a)

Fractionation

(b)

Processing Facilities

The Company is committed to regular maintenance services and repairs on the cryogenic processing facility.

(c)

Pipelines and Meters

The Company is committed to purchases of steel pipe, metering, and related materials during 2022.

(d)

Office and Equipment Leases

The Company leases various office space and equipment, as well as field equipment, under operating lease arrangements. Rental expense under operating leases was immaterial for 2022.

THQ-XCL HOLDINgS I, LLC and Subsidiaries

Notes to Condensed Consolidated Financial Statements

June 30, 2022

(Unaudited)

(6)

Contingencies

(7)

Membership Interests

There are two classes of membership interest – capital interests and management incentive interests. Capital interests held by Quantum, R2K and members of management have full voting rights and rights to share in the distributions of the Company. As described more fully in note 8, management incentive interests can be issued under the Incentive Pool Plan and are non-voting with no rights to share in distributions until the capital contributed interests have earned the full base return.

Total equity commitments from the members is $457 million, of which $358 million was funded as of June 30, 2022, leaving $99 million in available equity should the Company need additional funding.

(8)

Management Incentive Unit Plan

THQ-XCL HOLDINGS I, LLC AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2022

(Unaudited)

(9)

Subsequent Events

In preparing the condensed consolidated financial statements, management has evaluated all subsequent events and transactions for potential recognition or disclosure through September 16, 2022, the date the condensed consolidated financial statements were available for issuance. On September 6, 2022, the Company entered into a purchase agreement with EQT Corporation to sell the Company’s gathering and processing assets along with the upstream assets of affiliate company THQ Appalachia I, LLC for total consideration of $2.6 billion of cash and 55 million shares of common stock of EQT Corporation (EQT). ). The Company will be selling 100% of its membership interests in THQ-XCL Holdings I Midco, LLC (“THQ-XcL Midco”) along with the 100% membership interests of the subsidiaries of THQ-XcL Midco. This transaction is expected to close in the fourth quarter of 2022 with an effective date of July 1, 2022. No other items requiring disclosure were identified.

EXHIBIT 99.5

EQT CORPORATION AND SUBSIDIARIES

PRELIMINARY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following preliminary unaudited pro forma condensed combined financial statements (the preliminary pro forma financial statements) are derived from:

	•	the historical audited and unaudited financial statements of EQT Corporation and subsidiaries (EQT or the Company);

	•	the historical audited and unaudited financial statements of THQ Appalachia I, LLC (Upstream Seller), which includes the accounts of the subsidiaries for which equity interests will be acquired by the Company in the Acquisition (as defined below) (the Upstream Companies);

	•	the historical audited and unaudited financial statements of THQ-XcL Holdings I, LLC (Midstream Seller) which includes the accounts of the subsidiaries for which equity interests will be acquired by the Company in the Acquisition (the Midstream Companies); and

	•	the historical audited combined financial statements of ARD Operating, LLC and Alta Marcellus Development, LLC (Alta).

The preliminary pro forma financial statements have been prepared to reflect the effects of the following:

	•	Proposed acquisition by EQT of the Upstream Companies and the Midstream Companies (the Acquisition), pursuant to the Purchase Agreement (the Purchase Agreement), dated September 6, 2022, for expected consideration consisting of (i) $2.6 billion in cash and (ii) approximately 55.0 million shares of EQT common stock, plus or minus certain purchase price adjustments as defined in the Purchase Agreement.

	•	Effects of the term loan syndication of $1,250 million aggregate principal and the anticipated issuance of $1,000 million aggregate principal amount of senior unsecured notes. The Company expects to issue the senior unsecured notes at fixed interest rates and varying maturities with an estimated weighted average interest rate of 5.15%. The proceeds from the term loan syndication as well as the senior notes will be used to fund the cash consideration of the Acquisition (the Financing Transactions).

The preliminary pro forma financial statements are provided for informational purposes only and do not purport to represent what the actual consolidated results of operations or the consolidated financial position of EQT would have been had the Acquisition occurred on the dates assumed, nor are they necessarily indicative of future consolidated results of operations or consolidated financial position. The preliminary pro forma financial statements should be read in conjunction with:

	•	the accompanying notes to the preliminary pro forma financial statements;

	•	the audited consolidated financial statements and accompanying notes of EQT contained in EQT’s Annual Report on Form 10-K for the year ended December 31, 2021, as updated pursuant to the recast of certain financial information as set forth in exhibit 99.1 to EQT’s Current Report on Form 8-K filed on April 28, 2022;

	•	the audited consolidated financial statements and accompanying notes of THQ Appalachia I, LLC and THQ-XcL Holdings I, LLC for the year ended December 31, 2021 filed as an exhibit to the Current Report on Form 8-K to which this exhibit also forms a part (the Form 8-K);

	•	the unaudited condensed consolidated financial statements and accompanying notes of EQT contained in EQT’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2022;

	•	the unaudited condensed consolidated financial statements and accompanying notes of THQ Appalachia I, LLC and THQ-XcL Holdings I, LLC as of and for the six months ended June 30, 2022 filed as an exhibit to the Form 8-K; and

	•	the unaudited pro forma condensed combined financial statements of EQT and Alta, which was acquired by EQT in 2021, as set forth in exhibit 99.1 to EQT’s Current Report on Form 8-K filed on September 16, 2022, which is incorporated by reference herein.

EQT Corporation and Subsidiaries

Preliminary Unaudited Pro Forma Condensed Combined Balance Sheet

June 30, 2022

	EQT Historical		Upstream Seller Historical		Midstream Seller Historical		Pro Forma Adjustments				Pro Forma Combined

	(Thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	43,745	$	22,520	$	16,393	$	(2,640,555	)	(a)	$	1,084
								(38,913	)	(c)
								2,597,894		(l)
Accounts receivable, net		2,058,953		330,162		22,945		(30,286	)	(f)		2,364,582
								(17,192	)	(g)
Derivative instruments, at fair value		1,409,199		24,784		—		32,243		(b)		1,461,798
								(4,428	)	(c)
Prepaid expenses and other		573,732		2,243		2,072		—				578,047
Total current assets		4,085,629		379,709		41,410		(101,237	)			4,405,511

Property, plant and equipment		26,640,549		2,165,684		654,192		1,580,110		(a)		31,040,535
Less: Accumulated depreciation and depletion		8,438,478		497,964		77,263		(575,227	)	(a)		8,438,478
Net property, plant and equipment		18,202,071		1,667,720		576,929		2,155,337				22,602,057

Contract asset		29,250		—		—		—				29,250
Other assets		304,714		57,162		—		(32,243	)	(b)		312,097
								(11,080	)	(c)
								(13,752	)	(c)
								7,296		(d)
Total assets	$	22,621,664	$	2,104,591	$	618,339	$	2,004,321			$	27,348,915

	EQT Historical		Upstream Seller Historical		Midstream Seller Historical		Pro Forma Adjustments				Pro Forma Combined

	(Thousands)
LIABILITIES AND EQUITY
Current liabilities:
Current portion of debt	$	440,900	$	—	$	—	$	—			$	440,900
Accounts payable		1,700,406		184,702		27,817		20,978		(a)		1,875,066
								2,906		(b)
								(14,265	)	(c)
								(30,286	)	(f)
								(17,192	)	(g)
Derivative instruments, at fair value		4,568,003		402,137		—		266		(b)		4,569,559
								(400,847	)	(c)
Other current liabilities		480,438		3,306		—		(3,306	)	(b)		523,928
								1,440		(d)
								42,050		(h)
Total current liabilities		7,189,747		590,145		27,817		(398,256	)			7,409,453

Credit facility borrowings		100,000		598,253		156,940		(755,193	)	(c)		463,250
								363,250		(l)
Senior notes		4,409,727		—		—		2,234,644		(l)		6,644,371
Note payable to EQM Midstream Partners, LP		91,442		—		—		—				91,442
Deferred income taxes		742,670		—		—		(7,979	)	(k)		734,691
Other liabilities and credits		997,988		118,981		—		56,258		(a)		1,068,178
								(266	)	(b)
								400		(b)
								(111,039	)	(c)
								5,856		(d)
Total liabilities		13,531,574		1,307,379		184,757		1,387,675				16,411,385

Equity:
Total common shareholders’ equity		9,061,187		797,212		433,582		1,881,511		(a)		10,908,627
								(1,264,865	)	(i)
Noncontrolling interests in consolidated subsidiaries		28,903		—		—		—				28,903
Total equity		9,090,090		797,212		433,582		616,646				10,937,530
Total liabilities and equity	$	22,621,664	$	2,104,591	$	618,339	$	2,004,321			$	27,348,915

See accompanying notes to the unaudited preliminary pro forma condensed combined financial information.

EQT Corporation and Subsidiaries

Preliminary Unaudited Pro Forma Condensed Combined Statement of Operations

Six Months Ended June 30, 2022

	EQT Historical			Upstream Seller Historical			Midstream Seller Historical		Pro Forma Adjustments				Pro Forma Combined

	(Thousands, except per share amounts)
Operating revenues:
Sales of natural gas, natural gas liquids and oil	$	5,851,835		$	845,736		$	—	$	—			$	6,697,571
Loss on derivatives		(3,922,732	)		(528,493	)		—		572,011		(c)		(3,879,214	)
Net marketing services and other		19,295			(515	)		—		62,384		(b)		39,220
										(41,944	)	(g)
Midstream		—			—			46,124		(46,124	)	(b)		—
Processing		—			—			16,260		(16,260	)	(b)		—
Total operating revenues		1,948,398			316,728			62,384		530,067				2,857,577
Operating expenses:
Transportation and processing		1,055,808			92,992			—		(41,944	)	(g)		1,106,856
Production		153,568			65,987			—		10,783		(b)		227,326
										(3,012	)	(d)
Exploration		2,513			4,490			—		(4,490	)	(b)		2,513
Selling, general and administrative		128,372			8,129			5,102		(507	)	(c)		141,096
Depreciation and depletion		851,241			108,327			14,876		90,526		(e)		1,064,970
(Gain) loss on sale/exchange of long-lived assets		(2,190	)		19			—		—				(2,171	)
Impairment of contract asset		184,945			—			—		—				184,945
Impairment and expiration of leases		77,039			—			—		4,490		(b)		81,529
Other operating expenses		23,467			—			—		—				23,467
Midstream operating		—			—			8,695		(8,695	)	(b)		—
Processing operating		—			—			2,088		(2,088	)	(b)		—
Total operating expenses		2,474,763			279,944			30,761		45,063				2,830,531
Operating (loss) income		(526,365	)		36,784			31,623		485,004				27,046
Loss from investments		17,208			—			—		—				17,208
Dividend and other (income) expense		(10,909	)		—			—		—				(10,909	)
Loss on debt extinguishment		111,271			—			—		—				111,271
Interest expense		133,887			12,042			3,368		(6,692	)	(c)		195,130
										(8,718	)	(j)
										61,243		(l)
(Loss) income before income taxes		(777,822	)		24,742			28,255		439,171				(285,654	)
Income tax (benefit) expense		(157,463	)		—			—		121,197		(k)		(36,266	)
Net (loss) income		(620,359	)		24,742			28,255		317,974				(249,388	)
Less: Net income attributable to noncontrolling interest		4,328			—			—		—				4,328
Net (loss) income attributable to EQT Corporation	$	(624,687	)	$	24,742		$	28,255	$	317,974			$	(253,716	)
Loss per share of common stock attributable to EQT Corporation:
Basic and diluted:
Weighted average common stock outstanding		372,023												372,023
Net loss	$	(1.68	)										$	(0.68	)

See accompanying notes to the preliminary unaudited pro forma condensed combined financial information.

EQT Corporation and Subsidiaries

Preliminary Unaudited Pro Forma Condensed Combined Statement of Operations

Year Ended December 31, 2021

	EQT + Alta Pro Forma Combined (1)			Upstream Seller Historical			Midstream Seller Historical		Pro Forma Adjustments				Pro Forma Combined

	(Thousands, except per share amounts)
Operating revenues:
Sales of natural gas, natural gas liquids and oil	$	7,248,870		$	965,870		$	—	$	—			$	8,214,740
Loss on derivatives		(3,902,076	)		(489,444	)		—		513,261		(c)		(3,878,259	)
Net marketing services and other		40,491			4,571			—		116,805		(b)		80,504
										(81,363	)	(g)
Midstream		—			—			88,859		(88,859	)	(b)		—
Processing		—			—			27,946		(27,946	)	(b)		—
Total operating revenues		3,387,285			480,997			116,805		431,898				4,416,985
Operating expenses:
Transportation and processing		2,021,817			170,709			—		(75,152	)	(g)		2,117,374
Production		254,181			69,329			—		19,146		(b)		333,038
										(3,407	)	(d)
										(6,211	)	(g)
Exploration		24,722			9,115			—		(3,123	)	(b)		30,714
Selling, general and administrative		198,857			19,185			9,387		(4,728	)	(b)		221,533
										(1,168	)	(c)
Depreciation and depletion		1,866,662			166,225			30,431		222,828		(e)		2,286,146
(Gain) loss on sale/exchange of long-lived assets		(21,124	)		4,256			307		—				(16,561	)
Impairment and expiration of leases		311,835			—			—		3,123		(b)		314,958
Other operating expenses		70,063			—			—		4,728		(b)		108,591
										33,800		(h)
Midstream operating		—			—			15,398		(15,398	)	(b)		—
Processing operating		—			—			3,748		(3,748	)	(b)		—
Total operating expenses		4,727,013			438,819			59,271		170,690				5,395,793
Operating (loss) income		(1,339,728	)		42,178			57,534		261,208				(978,808	)
Income from investments		(71,841	)		—			—		—				(71,841	)
Dividend and other (income) expense		(18,669	)		—			—		—				(18,669	)
Loss on debt extinguishment		9,756			—			—		8,250		(h)		18,006
Interest expense		303,338			23,834			6,735		(12,669	)	(c)		425,825
										(17,900	)	(j)
										122,487		(l)
(Loss) income before income taxes		(1,562,312	)		18,344			50,799		161,040				(1,332,129	)
Income tax (benefit) expense		(443,144	)		—			—		45,753		(k)		(397,391	)
Net (loss) income		(1,119,168	)		18,344			50,799		115,287				(934,738	)
Less: Net income attributable to noncontrolling interest		1,246			—			—		—				1,246
Net (loss) income attributable to EQT Corporation	$	(1,120,414	)	$	18,344		$	50,799	$	115,287			$	(935,984	)
Loss per share of common stock attributable to EQT Corporation:
Basic and diluted:
Weighted average common stock outstanding		323,196												323,196
Net loss	$	(3.47	)										$	(2.90	)

(1)

This column represents the pro forma condensed combined statement of operations for EQT and Alta, which was acquired by EQT in 2021, as set forth in exhibit 99.1 to EQT’s Current Report on Form 8-K filed on September 16, 2022.

See accompanying notes to the preliminary unaudited pro forma condensed combined financial information.

EQT Corporation and Subsidiaries

Notes to the Preliminary Unaudited Pro Forma Condensed Combined Financial Information

1. Basis of Presentation

The preliminary pro forma financial statements have been prepared to reflect the effects of the Acquisition on the consolidated financial statements of EQT. The preliminary unaudited pro forma condensed combined balance sheet (the preliminary pro forma balance sheet) is presented as if the Acquisition and the Financing Transactions and the application of its proceeds had occurred on June 30, 2022. The preliminary unaudited pro forma condensed combined statements of operations (the preliminary pro forma statements of operations) for the six months ended June 30, 2022 and for the year ended December 31, 2021, are presented as if the Acquisition and the Financing Transactions and the application of its proceeds had occurred on January 1, 2021. The historical consolidated financial information has been adjusted to reflect factually supportable items that are directly attributable to the Acquisition.

The preliminary pro forma financial statements have been prepared using the acquisition method of accounting using the accounting guidance in Accounting Standards Codification (ASC) 805, with EQT treated as the acquirer. The acquisition method of accounting is dependent upon certain valuations and other studies that have yet to commence or progress to a stage where there is sufficient information for a definitive measure. Accordingly, the pro forma adjustments are preliminary, have been made solely for the purpose of providing preliminary pro forma financial information, and are subject to revision based on a final determination of fair value as of the closing date of the Acquisition. Differences between these preliminary estimates and the final purchase price allocation may have a material impact on the accompanying preliminary pro forma financial statements.

The Upstream Seller and Midstream Seller historical amounts have been derived from the audited and unaudited financial statements filed as an exhibit to the Form 8-K. Certain of the historical amounts of the Upstream Seller and the Midstream Seller have been reclassified to conform to the financial presentation of EQT. The preliminary pro forma adjustments include the removal of certain accounts of Upstream Seller and Midstream Seller, respectively, to present the accounts of the Upstream Companies and the Midstream Companies given that these accounts are not included in the Acquisition. The preliminary pro forma financial statements are provided for informational purposes only and do not purport to represent what the actual consolidated results of operations or the consolidated financial position of EQT would have been had the Acquisition occurred on the dates assumed, nor are they necessarily indicative of future consolidated results of operations or consolidated financial position.

2. Pro Forma Adjustments and Assumptions

The pro forma adjustments are based on currently available information and certain estimates and assumptions that EQT believes are reasonable. The actual effects of the Acquisition and the Financing Transactions will differ from the pro forma adjustments. A general description of the pro forma adjustments are provided below.

(a)

Pro forma adjustments to reflect the estimated value of net consideration to be paid by EQT in the Acquisition and the adjustment of the historical book values of the assets and liabilities of the Upstream Companies and the Midstream Companies as of June 30, 2022 to their estimated fair values. The following table represents the preliminary purchase price allocation to the assets acquired and liabilities assumed from the Upstream Companies and the Midstream Companies. This preliminary purchase price allocation has been used to prepare pro forma adjustments in the preliminary pro forma balance sheet and the preliminary pro forma statements of operations. The final purchase price allocation will be determined when EQT has completed the detailed valuations and necessary calculations subsequent to closing the Acquisition. The final purchase price allocation will differ from these estimates and could differ materially from the preliminary allocation used in the pro forma adjustments.

Pursuant to the Purchase Agreement, consideration for the Acquisition will consist of a base amount of (i) $2.6 billion in cash and (ii) 55 million shares of EQT common stock, plus or minus certain purchase price adjustments as defined in the Purchase Agreement. The purchase price adjustments will be applied evenly to the cash and stock consideration, with the adjustments to the stock consideration being determined by dividing 50% of the purchase price adjustments by $48.01. As of June 30, 2022, the calculation would result in the issuance of approximately 54.7 million shares of EQT common stock valued at $1,882 million (based on the closing stock price as of June 30, 2022 of $34.40) and cash paid of $2,641 million after giving effect of approximately $30 million of certain net purchase price adjustments. The effective date of the Acquisition is July 1, 2022.

The preliminary purchase price allocation is subject to change as a result of several factors, including but not limited to:

•

changes in the market value of the shares of EQT common stock issued as consideration;

•

changes in the purchase price adjustments defined in the Purchase Agreement increasing or decreasing the consideration, including increasing or decreasing the number of shares issued as consideration;

•

changes in the estimated fair value of the assets acquired and liabilities assumed of the Upstream Companies and the Midstream Companies as of the closing date of the Acquisition, which could result from changes in future commodity prices, reserve estimates, cost assumptions, interest rates and other facts and circumstances existing as of the closing date of the Acquisition compared to the preliminary pro forma financial statements included herein; and

•

the tax basis of the assets and liabilities of the Upstream Companies and the Midstream Companies as of the closing date of the Acquisition.

	Preliminary Purchase Price Allocation
	(Thousands)
Consideration:
Equity	$	1,881,511
Cash		2,640,555
Settlement of pre-existing relationships		(30,286	)
Total consideration	$	4,491,780

Fair value of assets acquired:
Accounts receivable, net	$	305,629
Derivative instruments, at fair value		52,600
Prepaid expenses and other		4,315
Property, plant and equipment		4,399,985
Other assets		7,383
Amount attributable to assets acquired	$	4,769,912

Fair value of liabilities assumed:
Accounts payable	$	204,946
Derivative instruments, at fair value		1,556
Other current liabilities		1,440
Deferred income taxes		—
Other liabilities and credits		70,190
Amount attributable to liabilities assumed	$	278,132

The final value of total consideration paid by EQT will be determined based on the aggregate amount of purchase price adjustments calculated in accordance with the Purchase Agreement, the resulting number of EQT shares issued based on said purchase price adjustments and the market price of EQT’s common stock at the closing date of the Acquisition. A 10% increase or decrease in the closing price of EQT common stock, as compared to the June 30, 2022 closing price of $34.40, would increase or decrease the total consideration by approximately $188.2 million, assuming all other factors held constant.

The estimated fair value of property, plant and equipment to be acquired based on information available as of the preparation of the preliminary pro forma financial statements included the following:

	Preliminary Purchase Price Allocation
	(Thousands)
Natural gas and oil proved properties	$	3,409,498
Natural gas and oil unproved properties		291,500
Other property, plant and equipment		698,987
Preliminary pro forma fair value of property, plant & equipment	$	4,399,985

The preliminary pro forma fair value of natural gas properties acquired from the Upstream Companies was measured using valuation techniques that convert future cash flows into a single discounted amount. Significant inputs to the valuation of natural gas and oil properties include estimates of: (i) recoverable reserves; (ii) production rates; (iii) future operating and development costs; (iv) future commodity prices; and (v) a market-based weighted average cost of capital. NYMEX strip pricing as of June 30, 2022, adjusted for forward basis differentials, was utilized in determining the pro forma fair value of reserves at a discount rate of 11%, after adjustment for expenses and basis differential. An increase or decrease in commodity prices, recoverable reserves, future operating or development costs or any of the other inputs noted above, as of the closing date, will result in a corresponding increase or decrease in the fair value of natural gas properties.

The preliminary pro forma fair value of acquired midstream gathering systems acquired from the Midstream Companies, including the related compression assets, and the acquired processing facilities (collectively the Midstream Assets) was measured primarily using the cost approach. Significant inputs to the valuation of the Midstream Assets include replacement costs for similar assets, relative age of the acquired Midstream Assets and any potential economic or functional obsolescence associated with the acquired Midstream Assets.

(b)

Pro forma reclassifications were made to conform to EQT’s presentation, including:

the reclassification of $32.2 million of other assets to derivative instruments, at fair value and $0.3 million of other liabilities and credits to derivative instruments, at fair value;

ii.

the reclassification of $3.3 million of other current liabilities to accounts payable ($2.9 million) and other liabilities and credits ($0.4 million);

iii.

the reclassification of lease abandonment expense of $4.5 million for the six months ended June 30, 2022 and $3.1 million for the year ended December 31, 2021 from exploration expense to impairment and expiration of leases;

iv.

the reclassification of $4.7 million for the year ended December 31, 2021 from selling, general and administrative expense to other operating expenses;

the reclassification of midstream and processing revenues to net marketing and other revenues; and

vi.

the reclassification of midstream operating and processing operating expenses to production expense.

(c)

Pro forma adjustments to eliminate certain accounts attributable to the Upstream Seller and the Midstream Seller, which EQT is not acquiring or assuming including:

Elimination of $22.5 million and $16.4 million of cash and cash equivalents from Upstream Seller and Midstream Seller, respectively;

ii.

Elimination of $4.4 million of current derivative instruments, at fair value, $11.1 million of non-current derivative instruments, at fair value (included in other assets), $400.8 million of current derivative instruments, at fair value and $111.0 million of non-current derivative instruments, at fair value (included in other liabilities and credits) from Upstream Seller;

iii.

Elimination of $13.8 million of restricted cash (included in other assets) from Upstream Seller;

iv.

Elimination of $13.7 million and $0.6 million of accounts payable from Upstream Seller and from Midstream Seller, respectively;

Elimination of $598.3 million and $156.9 million of credit facility borrowings from Upstream Seller and from Midstream Seller, respectively;

vi.

Elimination of $572.0 million and $513.3 million for the six months ended June 30, 2022 and for the year ended December 31, 2021, respectively, of loss on derivatives from Upstream Seller;

vii.

Elimination of $0.5 million and $1.2 million of selling, general and administrative from Midstream Seller for the six months ended June 30, 2022 and for the year ended December 31, 2021, respectively; and

viii.

Elimination of interest (expense) income of $(12.0) million and $5.4 million for the six months ended June 30, 2022 and $(23.8) million and $11.2 million for the year ended December 31, 2021 from Upstream Seller and from Midstream Seller, respectively.

(d)

Pro forma adjustments to conform to EQT’s accounting policies, including:

the capitalization of right-of-use assets and related current and non-current lease liabilities for assumed lease obligations pursuant to ASC 842, which had not yet been adopted by the Upstream Companies and the Midstream Companies as of June 30, 2022 in accordance with applicable private company accounting standards.

ii.

the elimination of certain water-related lease operating expenses from production expense.

(e)

Pro forma adjustments to increase or decrease depreciation and depletion expense due to the following:

The increase in the estimated fair value of property, plant and equipment.

ii.

The depreciation of gathering and water pipelines over a 50-year useful life and the depreciation of compression, measurement and processing assets over a 25-year useful life separate from the upstream oil and gas assets.

iii.

The increase in accretion expense related to the higher asset retirement obligation liability which was adjusted to reflect EQT’s internal plugging cost estimates, discount rate, and useful life estimates.

(f)

Pro forma adjustments to eliminate historical transactions between EQT and the Upstream Companies that would be treated as intercompany transactions on a consolidated basis relating to EQT’s marketing of natural gas liquids on behalf of the Upstream Companies, including:

Elimination of $30.3 million of accounts payable by EQT to the Upstream Companies for natural gas liquids sales as of June 30, 2022; and

ii.

Elimination of $30.3 million of accounts receivable, net from EQT to the Upstream Companies for natural gas liquids sales as of June 30, 2022.

(g)

Pro forma adjustments to eliminate historical transactions between the Upstream Companies and the Midstream Companies that would be treated as intercompany transactions on a consolidated basis by EQT, including:

Elimination of $41.9 million and $75.2 million of transportation and processing expenses of the Upstream Companies for the six months ended June 30, 2022 and for the year ended December 31, 2021, respectively, related to volumes gathered by the Midstream Companies, including $17.2 million of accounts payable as of June 30, 2022;

ii.

Elimination of $6.2 million of production expenses of the Midstream Companies for the six months ended June 30, 2022 and for the year ended December 31, 2021, respectively, related to water transportation related expenses incurred to transport water on behalf of the Upstream Companies which would be capitalized by EQT; and

iii.

Elimination of $41.9 million and $81.4 million of net marketing services and other revenues of the Midstream Companies for the six months ended June 30, 2022 and for the year ended December 31, 2021, respectively, related to volumes gathered on behalf of the Upstream Companies and water transportation services provided to the Upstream Companies, including $17.2 million of accounts receivable, net as of June 30, 2022.

(h)

Pro forma adjustment for estimated transaction costs of $33.8 million incurred related to the Acquisition, including underwriting, banking, legal and accounting fees as well as fees associated with a bridge loan facility that are not capitalized as part of the Acquisition of $8.3 million.

(i)

Pro forma adjustment to:

Eliminate $797.2 million and $433.6 million of historical equity amounts of the Upstream Seller and the Midstream Seller, respectively;

ii.

Give effect to the $42.1 million of transaction related adjustments described in (h) above to retained earnings; and

iii.

Give effect to the $6.2 million and $1.7 million of deferred income tax adjustments of the Upstream Seller and the Midstream Seller, respectively, described in (k) below to retained earnings.

(j)

Pro forma adjustments to eliminate historical interest expense on the Midstream Companies that was paid to the Midstream Seller for intercompany debt that is not being assumed by EQT in the Acquisition.

(k)

Pro forma income tax adjustments included in the preliminary pro forma statements of operations and preliminary pro forma balance sheet reflect the income tax effects of the historical information of the Upstream Companies and the Midstream Companies as well as the income tax effects of the pro forma adjustments presented herein. The pro forma income tax adjustments related to such historical information is to conform the Upstream Companies and the Midstream Companies historical information, which is derived based on a non-taxable flow through structure, with EQT’s taxable corporate structure. The tax rate applied to the pro forma adjustments was the statutory federal and apportioned statutory state tax rate, net of the federal benefit of state taxes, applied to pre-tax income. The preliminary pro forma statements of operations also reflect the following nonrecurring adjustments to arrive at a deferred income taxes balance of $734.7 million for the preliminary pro forma balance sheet:

Income tax expense of $12 million due to remeasurement of deferred income taxes to reflect the combined state apportionment rates; and

ii.

Income tax benefit of $10 million due to a reduction of EQT’s deferred tax valuation allowance. Since the Upstream Companies and the Midstream Companies will be included in EQT’s consolidated tax return following the Acquisition, the resulting reversal of temporary differences included in deferred income taxes related to the Acquisition allows EQT to realize a portion of its state deferred tax assets that previously had a valuation allowance.

(l)

Pro forma adjustments to reflect the impact of the Financing Transactions as well as additional borrowings under EQT’s credit facility, the proceeds of which will be used to fund a portion of the cash consideration of the Acquisition:

Increase in cash and cash equivalents and senior notes of $2,235 million for the expected issuance of $1,000 million aggregate principal of senior unsecured notes, net of $9 million of debt issuance costs as well as the issuance of $1,250 million principal of term loan, net of $6 million of debt issuance costs;

ii.

Increase in cash and cash equivalents and credit facility borrowings of $363 million for the additional borrowings under EQT’s credit facility;

iii.

An increase in interest expense of $61.2 million for the six months ended June 30, 2022 and $122.5 million for the year ended December 31, 2021 reflecting the additional interest that would have been incurred if the Financing Transactions were completed on January 1, 2021; and

iv.

A 0.25 percent change in the assumed interest rate of the notes would increase or decrease the interest expense by $1.3 million and $2.5 million for the six months ended June 30, 2022 and for the year ended December 31, 2021, respectively.

The preliminary pro forma financial statements do not reflect any compensation related adjustments as certain personnel matters are evolving and any recurring impact from compensation adjustments would not be factually supportable.

3. Supplemental Preliminary Pro Forma Natural Gas, NGLs and Crude Oil Reserves Information

The following tables present the estimated preliminary pro forma combined net proved developed and undeveloped, natural gas, natural gas liquids (NGLs) and crude oil reserves as of December 31, 2021, along with a summary of changes in quantities of net remaining proved reserves during the year ended December 31, 2021. The preliminary pro forma reserve information set forth below gives effect to the Acquisition as if it had occurred on January 1, 2021.

The following estimated preliminary pro forma reserve information is not necessarily indicative of the results that might have occurred had the Acquisition taken place on January 1, 2021 and is not intended to be a projection of future results. Future results may vary significantly from the results reflected because of various factors, including those discussed in the “Risk Factors” section in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

For all tables presented, NGLs and crude oil were converted at a rate of one million barrels (MMbbl) to approximately six billion cubic feet (Bcf), except in the case of the Upstream Seller Historical NGLs, which were converted at a rate of one MMbbl to 3.9 Bcf.

	EQT Historical			Upstream Seller Historical			Pro Forma Combined

Natural gas, NGLs and oil		(Bcfe)
Proved developed and undeveloped reserves:
Balance at January 1, 2021		19,802.1			2,754.1			22,556.1
Revision of previous estimates		(274.1	)		111.1			(163.1	)
Purchase of hydrocarbons in place		4,186.9			105.2			4,292.1
Extensions, discoveries and other additions		3,104.4			611.3			3,715.7
Production		(1,857.8	)		(219.7	)		(2,077.5	)
Balance at December 31, 2021		24,961.5			3,361.9			28,323.4
Proved developed reserves:
Balance at January 1, 2021		13,641.3			1,137.2			14,778.5
Balance at December 31, 2021		17,218.7			1,439.2			18,657.8
Proved undeveloped reserves:
Balance at January 1, 2021		6,160.7			1,616.9			7,777.6
Balance at December 31, 2021		7,742.8			1,922.7			9,665.5

	EQT Historical			Upstream Seller Historical			Pro Forma Combined

Natural gas		(Bcf)
Proved developed and undeveloped reserves:
Balance at January 1, 2021		18,865.0			2,130.9			20,995.9
Revision of previous estimates		(568.8	)		199.4			(369.4	)
Purchase of natural gas in place		4,186.9			96.8			4,283.7
Extensions, discoveries and other additions		2,786.9			584.6			3,371.5
Production		(1,746.3	)		(177.4	)		(1,923.7	)
Balance at December 31, 2021		23,523.7			2,834.3			26,358.0
Proved developed reserves:
Balance at January 1, 2021		12,750.3			915.6			13,666.0
Balance at December 31, 2021		16,152.1			1,166.3			17,318.4
Proved undeveloped reserves:
Balance at January 1, 2021		6,114.7			1,215.2			7,329.9
Balance at December 31, 2021		7,371.6			1,668.0			9,039.6

	EQT Historical			Upstream Seller Historical			Pro Forma Combined

NGLs	(MMbbl)
Proved developed and undeveloped reserves:
Balance at January 1, 2021		148.8			125.7			274.5
Revision of previous estimates		46.9			(11.7	)		35.2
Purchase of NGLs in place		—			2.0			2.0
Extensions, discoveries and other additions		47.1			5.5			52.7
Production		(17.0	)		(7.8	)		(24.7	)
Balance at December 31, 2021		225.8			113.8			339.6
Proved developed reserves:
Balance at January 1, 2021		141.5			45.9			187.4
Balance at December 31, 2021		169.8			57.0			226.7
Proved undeveloped reserves:
Balance at January 1, 2021		7.3			79.8			87.1
Balance at December 31, 2021		56.0			56.8			112.8

	EQT Historical			Upstream Seller Historical			Pro Forma Combined

Oil	(MMbbl)
Proved developed and undeveloped reserves:
Balance at January 1, 2021		7.4			22.2			29.6
Revision of previous estimates		2.2			(7.2	)		(4.9	)
Purchase of oil in place		—			0.1			0.1
Extensions, discoveries and other additions		5.8			0.8			6.6
Production		(1.6	)		(2.0	)		(3.6	)
Balance at December 31, 2021		13.8			14.0			27.8
Proved developed reserves:
Balance at January 1, 2021		7.0			7.1			14.1
Balance at December 31, 2021		8.0			8.5			16.4
Proved undeveloped reserves:
Balance at January 1, 2021		0.4			15.1			15.5
Balance at December 31, 2021		5.9			5.5			11.4

The following table summarizes the preliminary pro forma standard measure of discounted future net cash flows from natural gas and crude oil reserves as of December 31, 2021:

	EQT Historical			Upstream Seller Historical			Pro Forma Adjustments			Pro Forma Combined

	(Thousands)
Future cash inflows	$	70,844,136		$	11,618,602		$	—		$	82,462,738
Future production costs		(20,961,576	)		(1,398,518	)		—			(22,360,094	)
Future development costs		(2,882,921	)		(910,432	)		—			(3,793,353	)
Future income tax expenses		(10,433,091	)		—			(1,427,841	)		(11,860,932	)
Future net cash flow		36,566,548			9,309,652			(1,427,841	)		44,448,359
10% annual discount for estimated timing of cash flows		(19,285,424	)		(4,875,918	)		741,718			(23,419,624	)
Standardized measure of discounted future net cash flows	$	17,281,124		$	4,433,734		$	(686,123	)	$	21,028,735

The following table summarizes the changes in the preliminary pro forma standard measure of discounted future net cash flows from natural gas and crude oil reserves for the year ended December 31, 2021:

	EQT Historical			Upstream Seller Historical			Pro Forma Adjustments			Pro Forma Combined

	(Thousands)
Net sales and transfers of natural gas and oil produced	$	(4,636,576	)	$	(725,832	)	$	—		$	(5,362,408	)
Net changes in prices, production and development costs		17,290,913			3,067,654			—			20,358,567
Extensions, discoveries and improved recovery, net of related costs		46,078			—			—			46,078
Development costs incurred		764,002			536,703			—			1,300,705
Net purchase of minerals in place		3,491,441			94,684			—			3,586,125
Revisions of previous quantity estimates		184,552			403,478			—			588,030
Accretion of discount		336,646			94,697			—			431,343
Net change in income taxes		(3,614,029	)		—			(686,123	)		(4,300,152	)
Timing and other		51,639			15,376			—			67,015
Net (decrease) increase		13,914,666			3,486,760			(686,123	)		16,715,303
Balance at January 1, 2021		3,366,458			946,974			—			4,313,432
Balance at December 31, 2021	$	17,281,124		$	4,433,734		$	(686,123	)	$	21,028,735

Pennsylvania		001-3551		25-0464690
(State or Other Jurisdiction of Incorporation)		(Commission File Number)		(IRS Employer Identification Number)

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, no par value		EQT		New York Stock Exchange

	Q3 2022 (a)		Q4 2022		Q1 2023			Q2 2023			Q3 2023			Q4 2023			2024
Hedged Volume (MMDth)		273		288		298			353			356			282			17
Hedged Volume (MMDth/d)		3.0		3.1		3.3			3.9			3.9			3.1			—

Swaps – Long
Volume (MMDth)		135		191		44			41			42			14			—
Avg. Price ($/Dth)	$	5.13	$	6.06	$	6.19		$	4.77		$	4.77		$	4.77		$	—

Swaps – Short
Volume (MMDth)		365		338		42			41			42			42			2
Avg. Price ($/Dth)	$	2.96	$	2.99	$	2.69		$	2.53		$	2.53		$	2.53		$	2.67

Calls – Long
Volume (MMDth)		44		45		40			40			40			40			51
Avg. Strike ($/Dth)	$	3.89	$	4.05	$	2.72		$	2.72		$	2.72		$	2.72		$	3.20

Calls – Short
Volume (MMDth)		154		233		232			300			303			197			66
Avg. Strike ($/Dth)	$	3.78	$	6.24	$	9.46		$	4.85		$	4.85		$	4.69		$	3.11

Puts – Long
Volume (MMDth)		83		151		299			352			355			254			15
Avg. Strike ($/Dth)	$	3.75	$	5.29	$	4.50		$	3.30		$	3.30		$	3.34		$	2.45

Puts – Short
Volume (MMDth)		41		12		—			—			—			—			—
Avg. Strike ($/Dth)	$	3.58	$	2.75	$	—		$	—		$	—		$	—		$	—

Fixed Price Sales
Volume (MMDth)		1		1		1			1			1			—			—
Avg. Price ($/Dth)	$	2.38	$	2.39	$	2.43		$	2.38		$	2.38		$	—		$	—

Option Premiums
Cash Settlement of Deferred Premiums (millions)	$	—	$	—	$	(107	)	$	(81	)	$	(82	)	$	(74	)	$	—

Exhibit No.		Description
23.1		Consent of KPMG LLP (independent auditors of THQ Appalachia I, LLC).

23.2		Consent of KPMG LLP (independent auditors of THQ-XcL Holdings I, LLC).

23.3		Consent of Cawley, Gillespie & Associates, Inc.

99.1		Audited consolidated financial statements of THQ Appalachia I, LLC and subsidiaries as of and for the year ended December 31, 2021, and the notes related thereto.

99.2		Unaudited condensed consolidated financial statements of THQ Appalachia I, LLC and subsidiaries as of and for the six months ended June 30, 2022, and the notes related thereto.

99.3		Audited consolidated financial statements of THQ-XcL Holdings I, LLC and subsidiaries as of and for the year ended December 31, 2021, and the notes related thereto.

99.4		Unaudited condensed consolidated financial statements of THQ-XcL Holdings I, LLC and subsidiaries as of and for the six months ended June 30, 2022, and the notes related thereto.

99.5		Preliminary unaudited pro forma condensed combined balance sheet of EQT Corporation and subsidiaries as of June 30, 2022 and unaudited pro forma condensed combined statements of operations of EQT Corporation and subsidiaries for the six months ended June 30, 2022 and the year ended December 31, 2021, and the notes related thereto.

99.6		Report prepared by Cawley, Gillespie & Associates, Inc., dated August 19, 2022, with respect to estimates of reserves and future net revenue of THQ Appalachia I, LLC as of December 31, 2021.

104		Cover Page Interactive Data File (embedded within the Inline XBRL document).

	EQT CORPORATION

Date: September 20, 2022	By:	/s/ David M. Khani
	Name:	David M. Khani
	Title:	Chief Financial Officer

	CAWLEY, GILLESPIE & ASSOCIATES, INC.
	Texas Registered Engineering Firm

	/s/ W. Todd Brooker, P.E.
	W. Todd Brooker, P.E.
	President

13640 BRIARWICK DRIVE, SUITE 100	306 WEST SEVENTH STREET, SUITE 302	1000 LOUISIANA STREET, SUITE 1900
AUSTIN, TEXAS 78729-1707	FORT WORTH, TEXAS 76102-4987	HOUSTON, TEXAS 77002-5008
512-249-7000	817- 336-2461	713-651-9944
	www.cgaus.com

	Re:	Evaluation Summary – SEC Price Case
		*Tug Hill Operating Interests*
		Total Proved Reserves
		Certain Properties in Ohio, Pennsylvania and West Virginia
		As of December 31, 2021
		Pursuant to the Guidelines of the Securities and Exchange Commission for Reporting Corporate Reserves and Future Net Revenue

		Proved		Proved		Proved
		Developed		Developed		Developed		Proved		Proved		Total
		Producing		Shut-In		Non-Producing		Developed		Undeveloped		Proved
Net Reserves
Oil	- Mbbl		6,280.3		636.3		1,545.1		8,461.7		5,516.9		13,978.6
Gas	- MMcf		1,046,943.3		37,958.1		81,367.5		1,166,268.9		1,668,046.2		2,834,315.1
NGL	- Mbbl		45,855.3		1,942.7		9,162.7		56,960.7		56,799.3		113,760.0
Net Revenue
Oil	- M$		354,454.3		34,787.8		89,168.5		478,410.7		315,666.4		794,077.1
Gas	- M$		2,300,615.5		80,678.3		179,774.2		2,561,068.0		3,739,658.9		6,300,726.9
NGL	- M$		1,826,309.8		74,682.8		283,050.3		2,184,043.0		2,339,755.7		4,523,798.7
Severance Taxes	- M$		223,148.7		9,507.4		27,599.7		260,255.8		319,754.0		580,009.8
Ad Valorem Taxes	- M$		43,645.8		1,864.1		5,378.4		50,888.4		62,780.9		113,669.3
Operating Expenses	- M$		361,071.8		28,278.1		20,712.3		410,062.2		227,166.1		637,228.2
Other Deductions	- M$		30,419.6		2,613.8		2,096.6		35,129.9		32,481.1		67,611.0
Future Development Cost	- M$		15,115.4		1,914.0		1,808.6		18,838.1		891,594.2		910,432.3
Net Oper. Income (BFIT)	- M$		3,807,978.3		145,971.5		494,397.5		4,448,347.4		4,861,304.6		9,309,651.9
Discounted @ 10%	- M$		2,015,768.3		70,353.5		283,190.6		2,369,312.5		2,064,421.0		4,433,733.5

	Yours very truly,

	CAWLEY, GILLESPIE & ASSOCIATES, INC.
	Texas Registered Engineering Firm F-693

	/S/ W. Todd Brooker, P.E.
	President